Posted by: David Welch on January 23, 2008
It was a photo finish. But General Motors edged out Toyota Motor Corp. for the global sales crown by about 3,000 vehicles, selling 9.369 million vehicles around the globe last year. You could really call it a tie, except that GM gets to hang on to its 77-year-old title for another year. This nip-and-tuck sales battle raises a huge question for both companies: Should they care?
The answer for both companies should be a firm ‘no.’ First GM. The company lost money in North America last year and burned plenty of cash. Its top executives know this all too well. They have very tough new fuel economy regulations to meet, which will cost billions in development dollars. Continuing GM’s push into emerging markets and fending off competition at home will require billions in capital for new vehicles and technologies. And then there is the distinct possibility of a recession in the U.S. That will hit Detroit companies the hardest, since their buyers tend to be less affluent than the patrons of foreign auto makers.
GM has shown a lot more discipline when it comes to chasing sales for the sake of sales. But its incentives are still high. In December, the company spent more than $3,500 a vehicle in the U.S. on incentives, the most among major makers. My guess is that its marketers were just trying to boost volume in a weak car market and perhaps log a few thousand more sales to put the company over the top. Spending cash to buy sales has sapped profits at GM for years now.
In any case, GM has much bigger worries than a sales crown. That’s especially true given the fact that Toyota is still growing quickly and its ascendancy to the top spot may be a foregone conclusion. Chairman and CEO Rick Wagoner says he won’t easily give it up, but his bigger focus is profitability. Vice Chairman Bob Lutz says it might be a welcome break to let someone else become the target for criticism. Or, as he puts it, it’s someone else’s turn to be the guy at the county fair with his face in the rubber sheet enduring the cannonade of rotten tomatoes.
Toyota is well aware of this. The company doesn’t want the attention and scrutiny that comes with being No. 1. Its executives often try to show deference to Detroit and humbly make a case that they’re not a juggernaut. In fact, in December, Toyota backed off on incentives for its Tundra pickup truck, missing its goal of selling 200,000 in the U.S. by more than 3,000 vehicles. The reason: “All those suggested Toyota is a juggernaut, so we needed a little loss,” Toyota Motor Sales CEO Yukitoshi Funo told Bloomberg News last week. In other words, the company sand bagged.
That’s more than just customary Japanese politeness. The company’s headlong push for growth has come at a cost. Its leap into the pickup and suv markets has angered the same environmental groups who handed Toyota the green mantle. There has been a nasty little backlash. The company’s rapid-fire launch of new vehicles has taxed its engineers and factories, resulting in some big recalls and quality gaffes. Internally, top executives have said that they want to reign in growth. Maybe they are realizing that winning the global sales race could be inevitable. But rushing it could prove to be a pyrrhic victory. And it’s a win that the company doesn’t even need.