Who's No. 1? Who cares.

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.

Reader Comments

Noz

January 23, 2008 1:06 PM

Interesting thoughts and observations. I believe all too many Americans fail to realize that Toyota is a World-wide supplier of cars and trucks, the US is just a part of its market and in many ways dissimilar from all the rest. Toyota is working to fill demand of ready and willing buyers while GM is trying to create demand for mediocre products, and at a very steep cost/unit.

In terms of what the 'greens' think, who really cares? They will be vocal in their criticism regardless of what manu-facturers offer if for no other reason than to remain visible. Rather like Hot Aire Gore and his Global Warming fraud.

Who is No. One? Does it matter? Yes and no, a matter of whose ox is being gored. To the shallow thinkers it is important, rather like fighting over 'professional sports'.

carfanatic

January 23, 2008 1:15 PM

I hope Toyota continue to be in pursuit of perfection with quality and running the company profitable, learning the valuable lesson from Detroit's big3.

logic

January 23, 2008 1:41 PM

GM should pull out all the stops to maintain the #1 sales spot for one more year. Use cheaper parts, discount heavily, and lay off engineers who aren't working on anything that won't pay off in less than one year. Do everything possible to discount and sell as many trucks and SUVs as possible by December 31, 2008.

Eat the seed corn *now*. Tomorrow is someone else's problem. CEO Waggoner could collect a huge bonus payment after this one blitz year, convert it into gold and Euros held in trust under British banking laws in the Cook Islands, out of reach of U.S. authorities, and quietly fly to Costa Rica one night to live out his days in guaranteed luxury. Winner take all --that's the American Way!

Bob

January 23, 2008 6:40 PM

Its funny that we say "who cares" now that GM is lagging Toyota, but thats not what people used to say.

In actually, who cares who sells the largest number of cars, what we should care about is the company's profitability relative to the number of cars it sells.

For years, GM has lagged there...

David

January 23, 2008 7:43 PM

They just want everyone knows,I am NO1.

Nick

January 23, 2008 11:31 PM

Toyota is about as far from being 'green' as the moon. It was all marketing c.r.a.p. and I am disappointed. I am going to buy a Honda in 1 month from today. Bye bye ugly Toyota.

m.r.

January 24, 2008 7:36 AM

Amaricans should care! more and more of U.S. businesses are offshore based. in practical terms it means that more and more decisions are being made offshore that may not be positive for U.S. also,
since foreign government entities are part of American business they will have a greater influence with American politicians and other areas. U.S. is becoming a "renter"! even G.M. may be bought out or merged with offshore company that will shift control to a foreigner. conventional terrorists
should not be the only concern of U.S. government.

Clyde

January 24, 2008 11:32 AM

As a consumer, I have never cared who was #1 in sales. I have owned some of these vehicles and of course other household products. I guess the temptation to purchase what everyone else is buying from a defensive standpoint (hoping to get good quality and good engineering)is smart but does not payoff if you really want and like another product that fits your individual needs.

GH

January 24, 2008 11:38 AM

CONGRADULATIONS BUSINESS WEEK!

[Whoever ends up taking the crown will likely do so by a few thousand cars.]
1/23/08

Great insight!

From the Detroit News this morning,

[Photo finish: GM still No. 1]

"General Motors will continue its 76-year reign as the world's sales leader after reporting Wednesday that it finished last year 3,000 vehicles ahead of Japanese rival Toyota Motor." - 01/24/2008

~ My opinion is that *GM no doubt repurchased and sold for salvage* 3000
units they imported from around the globe.

It is certainly qustionable how GM management can continue to Buyout American jobs and continue to expect
to sell in this US narketplace.

Bobby Kessler

January 24, 2008 12:43 PM

Oh it's amazing now that Toyota might be number one, ah who cares! When GM was number one, it was a big deal. Quite the shift there. It may be too close to call this year in total number of autos sold, but Toyota has had a larger profit margin for almost a decade now. When 2008 comes to a close there will be a clear cut winner. Someone is on a war path and it's not GM, you decide.

RA

January 24, 2008 3:12 PM

We all have to remember that "sales" is not something you manage, it's merely a result of doing many other things well. Should GM care if they are #1? Of course, but only because this is a key indicator of how well their vehicles are designed, built, marketed, priced, serviced, etc. Do those things well (as Toyota has) and #1 will take care of itself, as will profitability and perception.

Selena Brumell

January 25, 2008 12:22 AM

I am wondering, how many recalls did GM have on the $3,500 in incentives? If any. Also what is the total number of recalls all year (all together), for GM and Toyota (all vehicles in inventory)? Who is number #1 here???

Patrick

January 25, 2008 11:52 AM

Being from Detroit, I can see how it would be an advantage to have another company ranked "#1" in the world. Keep in mind that Toyota is TERRIFIED of bad press. They realize that once they reach the pivotal top shelf, they will be under scrutiny like NEVER before in their history. GM has been under scrutiny since the 1920’s….welcome to the club. Now, the Detroit-hating media in LA and NY will have a new target and they will NAIL Toyota to the wall.

It’s damn shame, however, that Toyota hasn’t properly managed its explosive growth.

numerouno

January 26, 2008 7:39 AM

NOZ, You should go to dealership of GM and Toyota and actually compare the vehicles before saying what you said in your post. Look at the design (interior and exterior). GM's vehicles will make Toyota's bite the dust. As for quality (durability and reliability), GM's vehicle s are as good as Toyota's, but consumers are not willing to accept that because of the perceptions resulting from the past experience. Some might site rankings in JD Power. Even though GM's vehicles are enjoying some of their best rankings in last 15-20 years, I believe that those rankings really don't provide any useful information. Please read this

http://www.thetruthaboutcars.com/editorials/the-truth-about-jd-powers-iqs/

Because of its tarnished reputation in the past, even a minutest problem with GM's vehicle is magnified and scrutinized, where as problems of the same magnitude or even somewhat greater proportion in Toyota will not get as much scrutiny. So, it is up to you whether you want to develop an objective mindset, or just subjective mindset based on your false perceptions.

You should really keep and open mind about GM's vehicles, otherwise you will miss the chance of driving and owning some of the best cars in the industry. I would recommend that you research Cadillac, Saturn, Saab, and of course new Chevy Malibu and then form your opinion. Test drive them if possible.

kit

January 28, 2008 10:56 AM

hope Toyota continue to be in pursuit of perfection with quality and running the company profitable.
http://redsfer.balder.prohosting.com

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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