Analysis: How and why is Toyota outdistancing GM?
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I received the following questions from an accounting association magazine in India. These responses summarize my thoughts about the challenges Toyota presents to GM, not just in the United States but worldwide.
How did Toyota manage to squeeze the U.S. passenger-car market from the U.S. giant, General Motors?
Toyota enjoys much lower labor costs in the United States and benefits from an undervalued yen for cars made in Japan. In the United States, this comes to about $2,500 per vehicle. The entry level and middle level market segments are very sensitive to price and vehicle durability. Toyota has been able to translate its cost advantage into vehicles with higher, more attractive content and longer life than General Motors. Toyota's Camry and Corolla, and derivatives of those cars, have been able to dominate their market spaces -- they set the standard others must follow and they establish the price thresholds.
What strategies does Toyota follow to retain its No.1 position in the global market?
Toyota is constantly looking for ways to lower costs and improve products. It translates most of the additional profits it earns, over GM, into better product design and additional capacity. At GM, the executives vote themselves bonuses and the union demands more benefits and featherbedding at the first sign of profits.
While GM is closing its factories in its native country, how can Toyota open its new plants in North America?
It offers customers cars that are less expensive and less trouble to own over the life of the cars. Toyotas don't break as much and perform well. GM vehicles require more repairs and don't age well.
How will the native slogan "Wake up America and Buy American" affect the future of Toyota in the U.S. market?
Not much. Thanks to big bonuses to executives, outsized fringe benefits for the United Auto Workers union, poor product quality and just plain arrogance, GM and the UAW have lost the loyalty of American car buyers. Americans are not protectionist in their buying habits, and GM executives and the UAW have lost the trust and loyalty of many younger car buyers.
Apart from gasoline price rise, what other threats does Toyota face in the industry?
Toyota is having problems with becoming big. Vehicle quality has slipped in some places, and it has developed its own arrogance. With the full-size heavy pickup, it assumed it could command the kind of premium it does on cars, and introduced too many vehicles with to many options -- its trucks are simply too costly. Toyota has to earn the pickup truck market, and it assumed otherwise.
What according to you is the global future of the automobile industry in the coming five years? Any other comments?
First Published May 16, 2007 8:56 pm