Toyota, Take the Wheel

The Japanese manufacturer deserves its new status as the No. 1 automaker, because it produces better vehicles than Detroit does. Pro or con?

Pro: In the Passing Lane

The news talk-lines lit up when it was reported Toyota had taken the top spot in quarterly sales for the first time ever. After years of market share dominance, General Motors (GM) was finally beaten. In reality, Toyota has occupied the No. 1 position for quite some time. Look at profits or sales growth. Look at market capitalization, in which the worth of Toyota equals more than the sum of the Detroit Three combined.

Toyota (TM) has taken a long-term approach to building the most admired manufacturing company in the world. It has invested in people, truly its most valuable resource, and gotten better every year. In the meantime, the Detroit Three chased the short-term hot product (e.g., the latest hot crossover or large truck) or program (six sigma, lean product development, lean manufacturing) that promised to make up for decades of mistakes.

By the time the U.S. carmakers started their pursuit, Toyota had been investing for years. Witness that Toyota started pioneering hybrids—based on the belief that they represented a step toward the cars of the 21st century—10 years before the Detroit Three were seriously thinking about this. Toyota did this despite the consensus of disapproval among the leading analysts in the industry. Now the manufacturer is on its second generation of hybrid development (e.g., second-generation Prius, Camry Hybrid, Lexus 400H, Highlander Hybrid), while the Detroit Three are just waking up to the potential of this technology.

Toyota is not a perfect company. Because of increasing demand for its ingeniously designed and well-constructed vehicles, the company’s growth is outpacing its ability to develop employees. This has resulted in some recalls and quality issues that have been a concern, but as always, the carmaker is responding quickly and seriously on many fronts to solve the problems. For example, President Ken Watanabe gave permission to engineers to extend product-development time if necessary to be certain about quality.

We should all applaud the Detroit Three for improving tremendously in the last 20 years. Quality and productivity have gone up. But that resulted from learning from the master teacher, Toyota, and the students are far from catching up to the master.

Con: A Look Behind the Stats

Who’s No. 1? To its credit, Toyota is more concerned with making great cars than debating this point. But for the sake of argument, an NFL comparison might help.

In 1977, Walter Payton ran 1,852 yards. In 1980, Earl Campbell ran 82 yards more than that. Who had the better season? Payton, actually. Campbell had two extra games in which to earn his yards, because the NFL switched to a 16-game season in 1978.

In business, like sports, great companies can have an asterisk next to their names in the record book. Should Toyota? The company has turned into the top automaker in part because the Japanese government subsidizes the health care and pensions of its workers. Japan also boosts auto exports by intervening in capital markets to devalue its yen.

Is this enough for an asterisk? Today’s undervalued yen represents a $3,000 to $14,000 subsidy for each Toyota sold here (depending on vehicle cost, where it’s assembled, and the economist you ask).

Deciding between a Toyota and a Ford (F)?That decision becomes easier when the Japanese government essentially pays for leather seats and an automatic transmission. In fact, while the much-criticized health costs of the Detroit Three raise the price of every vehicle, the pricing disadvantage created by the yen is twice as large.”

In sports, “Who’s No. 1?” debates go on forever, because fans define No. 1 differently. It’s the same in business. It’s easy to say Toyota is first, because it sells the most vehicles. But in the U.S.—land of sweatshop-free sportswear—millions of Americans clearly care about which automaker is No. 1 in supporting U.S. jobs. Just ask Hyundai, which spent $16 million promoting its single U.S. plant.

Toyota ranks fifth—behind Ford, GM, Chrysler (DCX), and Honda (HMC)—in U.S. jobs per car. Does this mean Toyota is more efficient? No. Ford, GM, and Chrysler employ about 2.5 times more U.S. workers per car, because they have about 2.5 times more of their workers here in the U.S. To put it another way, no one is arguing that Hyundai is twice as efficient as Toyota, even though the Korean carmaker supports half as many U.S. jobs per car as Toyota.

Toyota certainly qualifies as a great company. But if we want to pick a champion, we should account for competitive differences that tilt the field. Better yet, we should fix them. That would make the game a lot more interesting.

Opinions and conclusions expressed in the BusinessWeek Debate Room do not necessarily reflect the views of BusinessWeek, BusinessWeek.com, or The McGraw-Hill Companies.

Reader Comments

Khengsiong

Not a level playing field? Not necessary.

The U.S. is the largest auto market. Being "home brands" gives Detroit certain advantages. Many Americans are still biased against imports.

Toyota locally produces more than half of the vehicles it sells in North America. If Detroit's management experts were smart enough, they would have set up plants in Japan to take advantage of the devalued yen.

GM only started to sell in my country a few years ago, and Chrysler is still absent. Yes, I know the Malaysian market is relatively small, but it does demonstrate the short-sightedness of Detroit: They thought they could survive solely on the American market.

-- khengsiong (Malaysia)

Rich

Jim Doyle, the question was, does Toyota produce better vehicles than Detroit? You didn't deal with that. The answer is yes, it does, and that's why it's No. 1. However, Detroit can escape its present dilemma by being a leader in vehicle development instead of a follower (as it has been for decades).

BBall

"Con" is the appropriate title for the second argument. Continue with the excuses and finger-pointing instead of admitting that decades of poor management have caught up with GM. Its old style of management focused on profits instead of continuous improvement. To use your football analogy, GM goes for the big play while Toyota grinds it out play after play.

I suggest GM management and Jim Doyle list all of the excuses they can come up with, but leave room for one more, poor management.

Achilles

What qualifies as a "better" car? More entertaining? Faster? Bigger? More fuel efficient? The colors it comes in? Aftermarket support?

All these questions correspond to personal preference. I personally find Toyota to produce bland, boring commuter cars for the average person who doesn't really have a passion for automobiles.

"What's popular isn't always best, and what's best isn't always popular." Just because most people buy Toyota cars doesn't make them the best. Just the most popular.

Jeffery Liker's argument is far too opinion-biased, whereas Jim Doyle provides more fact-based information (such as the large number of government-funded parts). I'm with Jim on this one.

Melissa

I agree that Toyota produces better cars then any other company, and that is just it. There is nothing to argue about.

TY

Khengsiong is wrong. Japan's government creates an environment that keeps foreign players from entering the market. Most Toyota exports go to North America. Some markets are too small to attract huge players. While Toyota is the champion, the field is really not level for fair competition. Hard to comment on who's right or wrong, since there are many external issues. But Detroit has to ask itself: What do consumers want today?

KP

BBall, I'm glad you like football analogies. Try this one. Toyota can "grind it out," because it always has a 1st and 5. No need for the big play. Even the worst coach of all time can win given that kind of advantage series after series.

I'm thoroughly amazed that Ford and GM have been able to survive this long with the grossly unfair advantage Toyota has.

Smiley

Good management and business policies are an advantage, but certainly not an unfair one. Toyota didn't achieve some defeat of the Detroit automakers; it simply moved in after Detroit destroyed itself with decades of poor management. And as far as all of these legacy costs, perhaps if American automakers had been properly funding their contractual obligations all along, they wouldn't be in this mess.

TPB

Like most debates, this is not susceptible to easy answers. Toyota's rise and dominance is an interesting lesson in the power of good management combined with sympathetic government intervention to help the "home team" get a leg up on international competition. Washington and American free-market ideologues should take note.

econguy

Thanks Melissa, for repeating the obvious. Some people have a tough time with that. Also, if Detroit had these advantages, it would have elephantine designs and the UAW would demand 10-hour work weeks.

Shakir Rahim

I find it ironic that Doyle is criticizing government intervention in the market when the U.S. government provided $1.5 billion to Chrysler in 1979 so it could stay afloat.

Gio

If GM had those advantages, we might be driving fuel-cell powered cars by now. GM has been investing considerable time and money in alternate fuel-cell vehicles for years; its focus has always been further down the road than Toyota's. It felt that hybrid vehicles were at best a stopgap, while Toyota based its environmental strategy mostly upon the hybrids. Time will tell which view was correct.

Khensiong: GM has significant market shares in Europe (Opal) and South America. It sells more cars than anyone else in China. It has been a global company for a long time now.

Stan

The Big Three caved to the unions for years and passed the additional cost on to the consumer, (because in those days there was no competition), and look at the shape they're in today.

To make matters worse, the quality and designs, for the most part, have been second rate for decades.

Maybe the Big Three can learn from the Japanese, just as the Japanese learned from the Big Three some 40 years ago. I certainly hope so, because I would love to buy American again.

Having said that, where will I buy my hybrid next year? From Toyota, most likely.

DrShot

Poor management has been a tumor on the brain of major U.S. auto companies for some time now. Short-term thinking, making the fast buck today, and not thinking of long-term economics has knee-capped U.S. companies. Unions were great when they were created eons ago, but most are self-serving profit-generating entities (also known as leeches). Obviously, there is not any single solution to fix the problem or close the gap, but there must be a place to start.

Detroit needs to do some good old soul searching if the golden years ever are to be revisited. Otherwise, Detroit will always be singing the blues.

WDT

After all is said, the one big fact is this: U.S. carmakers don't have a chance unless they wake up and make cars that people want to buy. When will they figure that out? Look at recent offerings, and you'll see a never-ending parade of (1) Detroit gas guzzlers with huge engines and (2) unimaginative designs (Thunderbird, Ford Five Hundred, GTO, Malibu, anything by GMC). This has nothing to do with health care and pension costs, and everything to do with whether or not the U.S. carmakers will survive. I don't see anything coming out of Detroit that I want to buy, and that's a shame. I'm quite happy with my Nissan, thank you (not everyone has a Toyota).

chandra sekhar

Toyota is by far the greatest company, and has a clear strategy of delivering quality rather than just trying to be No.1 in the world. In India, too, Toyota is on an upswing, and GM is trailing behind. If GM wants to regain its No. 1 position, it should concentrate on making next-generation cars rather than maintaining temporary sales by providing incentives that will take at least a decade or two to pay off.

cliff goff

The truth--you can't handle it. Toyota has had more recalls in the last three years than the Big Three combined. These recalls had to go to court before Toyota would repair. We are talking about replacing engines, not hoses. We have become a nation dependant on foreign goods, and it is a shame, GM, Ford, and Chrysler produce some of the finest cars and trucks in the world; see JD Powers reports. As for me it's apple pie all the way. I love my Chevrolet.

joe c

The reason Toyota is first in sales is the advantages it has with trade agreements and currency rates. Not too long ago, the entire Japanese economy was in a funk.

Toyota is a good company with a handicap, no long-term liabilities to its employees--health care, pensions, etc.

As far as quality, that's a given now. If you don't have it, you're in trouble--ask Mercedes, 2000 to 2003. I think global market-share will be the battle, and it isn't over yet. It is sad that U.S. inhabitants don't buy products--regardless of manufacturer--made in this country.

Nick

I just bought a new Buick Lucerne, and I am 28 years old. I am so sick of hearing about Toyota I want to puke. Fact is, look at all the recalls they have been having, and it will continue to get worse because they will slop cars together to keep up with demand. I will always buy a car that is American-owned and -made. When the UAW and the Big Three set up their new contract, they should free up more cash; then it will be an even playing field to some degree. I saw someone the other day with a bumper sticker that said, "Proud to Be American" on a Toyota Corolla. Wow, that makes a lot of sense. I will keep my Buick while the rest of you Toyota drivers take American jobs and flush them down the toilet.

fergy

It's all about dysfunctional management. GM still has its empire of several vehicle groups loaded with presidents and bonus-eligible executives. There should be three vehicle groups: truck, Chevy, and Cadillac. Focus on 15 to 20 models. Get rid of all the duplication of effort. There is no need for a Cadillac to have 30 to 35 different models. There are billions of dollars to be saved.

LARRY

It's always the union workers who have to take cuts. Why in hell is it OK for upper management to make millions in wages while the auto companies flounder? Maybe some of them could live on just a few million.

Tony

In response to the question of quality: If you plan to buy domestic and drive it until the warranty is up, then who cares? If you plan to buy a Toyota and drive it for 150,000 miles and give it to your daughter, who in turn gives it to her sister, who in turn sells it to her friend, then do so. With a little loving care, it will stand the test of time.

Where's Dick Cheney?

Bottom Line, Toyota has always owned the U.S. Auto market. The U.S. simply can't compare in terms of quality, R&D, and of course pride. It's going to be tough for them to lure hard-core American truck fans to the new Tundra, but of course Toyota will win again and again.

Here's the problem with the American auto industry: Cocky, careless, and complacent. There are too many cars and trucks and trucks and trucks per manufacturer.

Why so many trucks? Well let's see; they guzzle quite a bit of gas, which equals more revenue for the energy companies, which also equates to more money in the hands of, well you guessed it, the Arabs and Saudis.

Hey, don't we have a cowboy in office from Texas who has some ties with the Saudis? Makes you wonder why we'll probably never see an alternative fuel or technology take the course like crude oil has for the past 60 or 80 years. Why? Simple, because if its not putting a lot of money in his hands first, and then it's not going to put any in ours.

The day someone creates some sort of human tele-portation device will be the day all the big governments of the world (or the U.S.) get together and conspire to control it. Imagine what tele-portation would do--no need for airlines, trains, boats. Not to mention less demand for fuel. (Did I say fuel?)

It's all a conspiracy, just like everything in the country, from JFK, to Roswell to 9-11. If you think the towers went down simply because of jet fuel, do some more digging. Oh yeah, and while I'm at it, the moon? They sent astronauts to the moon in a frame wrapped up in aluminum foil and expected them to return home alive after catching some gamma-rays.

One thing's for sure, America is one big naive country. I'm a proud American, but a lot of things need to change around here.

MARC

So many cars and trucks, and they can't even make one right. Forget about styling. I think the Big 3 should pack their bags for Tokyo and relearn how to design cars the right way.

I think this ignorant cocky cowboy nonsense attitude of "how could you buy a foreign car?" has to stop. Hey, if you can't make a quality product like the Japanese automakers have, why should I waste my money on Ford or GM?

Everybody complains about the price at the pump, but I don't see anyone doing anything about it. Let's face it: Bigger engines mean more gasoline.

Keep making those trucks up in Detroit, boys--the pumps should hit about $6 a gallon by 2015. By then, Honda should be right in Toyota's rear view mirror.

DeeBee

Let see: I could not keep my new GM truck out of the repair shop. The repair costs were doubling my payments. My Toyota product, on the other hand, has 95,000 miles on it, is seven years old, looks like new, and has had nothing break. Screw Detroit.

Mark

According to BusinessWeek's Jan. 22, 2007 issue, Toyota has recalled 9.3 million vehicles in the last three years, which is nearly four times the number of recalls in the three year period prior to 2004.

Other recent news that won't sit well with a Camry-conscious public is the class-action lawsuit recently settled by Toyota regarding ruinous oil sludge buildup covering 3.5 million Toyota and Lexus (yes, Lexus) vehicles.

Optimistic statements by Toyota executives aren't going to cut it for long--particularly when they don't match well with reality. Denial in the Camry-company camp seems to be setting in. Toyota 's North American president Jim Press recently disputed the suggestion that his company no longer enjoys a large lead in reliability over the American competition. Speculating on the thoughts of American car company well-wishers while speaking at the recent Chicago Auto Show, Press said "I think there's some hope that the gap in quality is closing, but it really isn't."

Oh, really? That's a pretty strong comment considering Toyota recalled 1.27 million vehicles in one swoop in 2005, recording the biggest-ever recall in history for a Japanese car company.

But, recalls notwithstanding, the evidence that the quality gap is closing is pretty indisputable, and the evidence has been piling up for more than just the last couple of years. With the following facts, you can make your argument for American car quality fully bulletproof - even among your most ardent foreign car-defending friends.

A February 10, 2003 BusinessWeek told of how undeniable it was that GM cars are better built than they used to be. The article cited an improved J.D. Power quality ranking and a Consumer Reports recommendation for 13 of GM's vehicles (equal to 41% of their sales volume) compared to just five recommended GM vehicles for the previous year. The Chevy Impala beat the Camry in a quality survey, and Buick beat BMW.

BusinessWeek also reported Sept. 23, 2003 that GM boosted its productivity 23% in six years while Toyota's productivity remained flat, and that GM's most-productive factories now beat Toyota 's most-productive factories.

A 2004 Consumer Reports ranking selected the Buick Regal as the most reliable among family sedans, beating the Toyota Camry, Honda Accord and Nissan Maxima. They also gave recommended ratings for four Ford models, including the Ford Focus.

J.D. Power and Associates awarded Cadillac's Lansing Grand River assembly center its highest honor - the Gold Plant Quality Award - in 2004.

An Aug. 4, 2004 Wall Street Journal article said Toyota's lead in quality and reliability has narrowed in some segments and disappeared in others. Quality problems were reportedly "mushrooming."

The Toyota Camry hasn't been awarded the best in its segment since the year 2000, but many Americans continue to regard it as the number one model in terms of quality. Toyota's Kentucky Camry plant was awarded with high initial quality rankings by J.D. Power from the late 1980s through the 1990s, but it plummeted to number 26 in 2002, improving to only number 14 in 2004, while two GM factories and one Ford factory took the top three spots that year.

* In a J.D. Power Initial Quality Survey of new 2004 cars, Chevy placed second behind Honda and Toyota sank to number three.

As far back as at least 2003, BusinessWeek has reported that American consumers regard certain foreign cars as better built than American cars, even when facts prove otherwise.

Fast-forwarding to 2006, J.D. Power shows Mercury, Buick and Cadillac beat Toyota in a list of dependable cars. Two Buicks and a Mercury took the top three midsize car awards; Mercury, Ford and Buick took the top three large car awards; Ford took the midsize van award and the midsize truck award; and GMC and Cadillac took the large MAV (multi-purpose activity vehicle) and large premium MAV awards, respectively.

In an article about trust issues, BusinessWeek's Dec. 11, 2006 issue stated "GM's quality nearly equals Toyota 's." Perceived quality among the American public is another story, however. The difference between the actual quality of American cars and the perceived quality of American cars is the "perception gap."

In the same article, J.D. Power's director for retail research said "Actual quality is so close." discussing the quality rankings of GMC, Chevrolet and Cadillac placing them on par with both Honda and Toyota .

And most recently, of course, the Ford Fusion and Mercury Milan beat the Honda Accord and Toyota Camry according to Consumer Reports.
What's needed among automotive senior executives, and much of the media as well, is a return to intellectual honesty. Everyone tends to have their favorites and biases (mine are pretty obvious) but I pride myself in sticking with the facts to back up my comments.

When Toyotas North American president says that the quality gap isn't really closing, he's not being intellectually honest. Some editorial writers aren't either. When Douglas Brinkley trumpeted Indiana 's success in a Wall Street Journal article last year for attracting a Honda plant to their state--even though it took $140 million in tax credits and incentives--he wasn't what you would call "intellectually honest." In an apparent attempt to convince the reader that Honda doesn't send any automobiles to the U.S. from outside the country, he said the following: "Turning farm fields into factories, that's what Henry Ford used to do. Today, in the heartland, it's being done by Honda - a company that doesn't manufacture imports but builds American-made cars."

Such statements lead the reader to think that some Japanese companies make all of their cars in the USA . Hardly. In fact, according to a January 8, 2007 Wall Street Journal article, the NAP ratio - a ratio that compares how many cars are built in North America vs. the number of cars imported - is slipping for Toyota . And according to Toyota internal documentation, the ratio is going to worsen next year.

Occasionally I'll find an editorial writer that dares to step away from the foreign biases of others in the same industry and rate cars objectively, rather than relying on the mind set of the question "will American cars ever match the Japanese cars in quality?"

Editorial director for Consumer Guide Automotive Mark Bilek departed from the typical mind set of his colleagues back in June of 2005 by declaring that the Ford Five Hundred was the best car he'd ever driven.

That's good news for Ford, since the Five Hundred is being renamed the Taurus and will get several more second-looks because of the Taurus' higher name recognition. Billek said he judged the Five Hundred based on "what it is" and how well it "fulfills its mission." Based on this, his opinion was that the Five Hundred was "simply the best full-size sedan sold in America ."

I am confident, however, that people like Toyota 's Jim Press can be somewhat honest in their statements about the competition from time to time. He did say that the "car of the show" at the Detroit Auto Show in January was, for him, none other than the Chevy Malibu . Maybe there's hope for intellectual honesty after all.

Roger Simmermaker is the author of How Americans Can Buy American: The Power of Consumer Patriotism. He also writes "Buy American Mention of the Week."

Khengsiong

Some of you mention the weak yen as a factor that contributes to the upswing of Toyota. However, this is not always so.

I am reading Managerial Economics, 9th edition. According to this book, the dollar exchanged for 113 yen on Jan. 5, 1994. On April 19, 1995, the dollar was worth 80 yen only. That was a 34% appreciation of yen.

Toyota increased the price of its Celica ST Coupe by a mere 2%. At the same time, strong yen allowed it to acquire manufacturing plants in the U.S. at favorable cost.

The Detroit Three are after short-term gain. Japanese carmakers are more concerned with long-term profit. Toyota thrives regardless of the exchange rates.
--khengsiong (Malaysia)

Henry

Jim, stop with the excuses about the level playing field. It seems as though whenever an American company can't complete, out come the excuses that it's because it is not playing on a level field.

The fact is that there will be times when companies from another country will do better than us. As a matter of fact, I think that the Big Three screwed up in giving what the American consumers want. As you can see from the posts here, most would rather buy an American car. This preference should have been an advantage for the Big three, and the fact that Toyota got to the top in an uneven playing field shows that it has something right. It builds cars people want to buy, period. It's not about cheap cars but rather quality cars.

Instead to pointing fingers at others and being a crybaby, great men admit they're beat, and regroup to do even better.

Let's stop using the "uneven playing field," because it will never be even. If the field were even, there would be governments (American included) that would change the rules to benefit the home team. Accept this fact, and keep battling and fix what needs to be fixed to stay competitive.

You win some; you loose some. Don't be a poor sport and crybaby.

logic

American companies are too top-heavy with MBAs focusing on "strategy." Japanese companies are lean and led by engineers who have risen to the top, and focus on the tactics of winning one customer at a time. We have a lot to learn.

CarMan

Resale value, people. That's why Honda and Toyota are on top.

Toyota and Honda are associated with quality. That's why they have such great resale value.

American cars are associated with low quality; its already in the minds of car buyers and will take years to change that. That's why their resale values are terrible.

Americans want to buy American cars, but the quality and resale difference is too great. Once American manufacturers close this gap, more Americans will buy their cars. Let's hope people don't become loyal to Honda and Toyota. I wouldn't blame them if they did.

Robin Perez

Let me start by acknowledging that nobody's perfect, not even mighty Toyota, and they have their share of problems (e.g., recalls and misfires) and sometimes their share of arrogance (blaming owners for engine sludges in the past). That said, I will charge on. I will respond to some comments here. Even playing field? Sure, the yen is weaker nowadays, and Toyota does not have those huge health-care and pension costs, but remember that half of Toyotas (all Scions and most Lexuses) are built in Japan, which has higher production costs, and then add shipping costs plus an import duty of 2.5% for cars and 25% for trucks, and on top of that, Toyota still manages to make a profit. The Detroit makers don't deal with many of those costs and still cry that it's unfair trade to them. They import many vehicles from low-cost plants in Mexico and yet can't make a fair buck (or so they claim). What really happens is that while Toyota has been focused all along on long-term growth and steady improvement to their products, the Detroiters have been doing nothing less than awful management.

Example: In the 1990s, the Big Three made huge profits out of the SUV craze--did they use that money to make better vehicles or for more R&D spending? Did they save for their retirement and health plans? Nope. They went on a shopping spree. Buying (unsuccessful) foreign brands, hoping they were getting low-hanging, promising fruits (Saab, UK luxe marques, the big Fiat mess), and snapping up other types of businesses (Echostar). Forward time to this day, and one can understand how short-sighted management was. At that very same period of time, Toyota was pouring big bucks in R&D for the hybrid program--they were nutty, some may have thought. Gas was ultracheap, and seemingly nobody wanted cars anymore. The bling bling was in SUVs and trucks.

Being a savvy marketer, Toyota got into that game, too, selling eight different SUVs in this country--but unlike the Big Three, they never abandoned the car market. Ten years ago, they released the Prius and Toyota and became the laughing stock of Detroit--losing thousands of dollars in each car sold at a time when monster trucks ruled the road. Today look who's laughing. Last month, the Prius outsold every single American car except for the Chevy Impala (yes, the Prius has incentives, but so does every mass-market car out there).

Now GM wants to paint itself as an eco-friendly market leader. Sorry, GM, you're 10 years late and haven't delivered yet. Also, people think GM will be ahead eventually because it's focusing on fuel cells instead of hybrids. Wrong. Most of the elements to be used in fuel-cell vehicles, save the fuel-cells themselves, are being tested in the real world in today's hybrids--motors, electronic controls, batteries, etc.--and in that field, Toyota has a big advantage. It takes vision, not greed, to win in the end. Before I finish, as someone pointed out before, why do executives in Detroit pile up millions in wages and bonuses and at the same time demand sacrifices by those who do the real, sweaty job? Those at the plant level are not the ones who made the horrendous decisions that brought to this shameful state. The real responsible parties should be the ones first willing to take cuts in niceties if they want to keep enjoying some of them.

Rishi

U.S. carmakers were the first ones on the field. How did the dynamics of the field change? It is all about quality and reliability of the product. If I am taking my family on a vacation involving a long interstate drive, I would rather trust my Camry with 100K miles than an American car with 60K miles. Straightaway, it's a 4-year disadvantage.

Furthermore, American car dealers--for example, Ford (especially in Texas)--are horrible to deal with. Brash, arrogant, and unhelpful.

Toyota car experience goes way beyond price effectiveness--superior quality, rock-solid reliability, and professional service.

Finally, I have read several articles in which American carmakers complain about the high health-care cost disadvantages. The question to ask is: Will the quality of car be better if all the workers stop getting any health-care benefits? No. The problem is elsewhere. The design, manufacturing, quality, and service efficiency is where I would recommend they start.

Newton

My car turned 11, and I went shopping for a new one this year. With the rising cost of gas, I was looking for the four-door car with the best fuel-efficiency. This was the Prius, so I bought it. Price was not a concern. When GM or Ford starts putting out four-door cars that routinely get 50 mpg like my Prius, I will buy a GM or Ford. All the excuses GM and Ford put out about subsidies, currency exchange rates, health-care costs, etc., do not explain why Toyota sells the four-door car with the best fuel-efficiency.

John Maxwell

When I read about GM asking Chevy customers to check out Camrys and Accords at GM showrooms, I got the impression they really think U.S. car buyers are dumb schmucks from the hills. It's again wasting money with comparisons and 100,000-mile warranties. Hyundai can do that, because they really have worked on their quality, while GM is looking for a bogus quick fix. It's a hollow, thoughtless, expensive gimmick just like GM's rebates on SUVs.

Can someone tell GM and Ford that their products are horribly designed? I rented a Chevy Uplander in Hawaii while I stayed at the Marriott's KoOlina Beach club in Oahu. I simply couldn't believe how horrible the product was, especially when compared with my Sienna. I feel strongly compelled to go to every GM and Ford dealership and yell out to the floor-sales reps and their managers that they ought to tell their manufacturers their product are bad--worse than Kia or Hyundai.

It's simply amazing that the buyers, dealers, and auto magazines don't have the guts to tell the kings that they are nude. Recently I saw a commercial for a BMW X-5 touting cupholders. Imagine that, a German car company talking about a cup holder in 2007 while all of of us had the cupholders in our Accords and Camrys since our college days (mid 1980s). It took the German auto industry 20 years to accept that we need cupholders for our lattes. Even they discovered copying features from Japanese cars is OK.

If we don't contend with the issue of bad design, atrocious interiors, and horrible vehicle noise, the Big Three will keep manufacturing cars like SUV trucks. Looks like they have forgotten that most of the car buyers are from not farmlands but rather all over America from coast to coast.

Getting back to my Chevy Uplander Experience, it was loud, the interior was shoddy, and the experience was more like a Ford truck designed for the cow farms rather than urban living. Having grown up with Japanese cars all my life ( Hondas and Toyotas), I found not a single touch of softness or smoothness in the Chevy. It looked like it was designed for an orangutan or an ape.

For starters, forget about competing with Japanese or Korean car companies; just develop reliable, simple, cleaner-designed autos. They have destroyed the American car market by selling SUVs to people who can't afford them in the first place. Smart and educated consumers go for Japanese SUVs, wealthy go for German SUVs, and frugal go for Korean SUVs, so now we are left with U.S. SUVs for the dumb breed who would actually buy an SUV that the dealer is paying buyers money (in rebates) to clean their lots. Now these SUV owners can't afford gas and insurance, yet they have to drive massive vehicles that play on emotions and egos, rather than the environment or pocketbooks. I can't believe how the government. actually let GM and Ford do this to financially challenged people. It's like selling liquor to an alcoholic or drugs to an addict.

Finally, please gather all your journalists and put some sense into GM and Ford brass. Or else they will also go the Chrysler way and simply disappear into oblivion. If the educated lot doesn't stand up and voice the right thing to do, GM will simply be blown away like the TV industry and steel industry. Please get in touch with the Big Three and have them talk to their designers. I would drag those designers into Japanese cars and lock the doors so they know the difference between a Seiko and a Big Ben. If we don't do this now, GM and Ford will be history.

Hamid

Robin Perez comments:
"First let me say that I am not an American and these comments are not patriotic, just my own belief."

For the first comment, well thanks for all the stats and logic, but hey, there is a simple rule: If there were no advantage to making the cars abroad (even with all those taxes and stuff that you mentioned), they simply wouldn't make it there right? So there is a big advantage in making the cars in Japan and exporting to the U.S. Look at the all the electronics built in the Far East and shipped here, for instance.

About the "vision" comment, it is funny in my opinion that people discuss how "smart" and "clever" Toyota is in regard to pioneering the hybrid car market. There is a simple explanation for it. I think and it is called "culture"--not "vision." It is in the culture of Japanese automakers to produce low-cost cars, and the hybrid is one of the best options in terms of the long-term costs. I don't think Toyota figured the war in Iraq and Middle East tensions would lead to high price of gas 10 years ago.They have built cheap (and not fun) cars and continue to build them. On the other hand, American and German automakers focus on the fun-to-drive cars and the driving experience. Therefore, they start R&D for these types of cars now, when we have an oil problem. It wouldn't hurt if they started earlier, but anyway...

christine goff

Quote for this issue: Have you lost your job yet? Keep buying foreign products!

Robin Perez

Response to Hamid: Patriotism has nothing to do with this. Purge yourself. I guess everything in your house is Made in the USA. American automakers' bad shape is their sole responsibility. Short-sightedness and greed have brought them down, not the foreign competition--nobody forces anybody to buy anything. As someone commented before, the domestic auto industry could go the way of the electronics or steel industry--gone in large part due to their own mistakes. Compare that to the computing sector: The U.S. is still king, because it innovates and keeps itself ahead of the competition. I, for one, have five Apple computers for business, no Sonys, no Toshibas. Regarding American carmakers' focus on "fun-to-drive" cars, please list all those, because I can only count a handful--Corvette, Mustang, Viper, Solstice, Sky--out of dozens and dozens of models (how fun is a Malibu or a Five Hundred or a Stratus?).

Newton

I see a lot of comments suggesting that buying foreign cars will lead to the loss of U.S. jobs. The authors of these comments should realize that both U.S. and Asian carmakers produce cars in multiple locations across the world. For a given car, the engine might be produced in Mexico, the tires from Malaysia, the transmission system from Germany, the electronics bought from Japan, the external frame in Canada, the seats made in China, and everything assembled in Detroit. Does this mean the car was built in America? Not really; only one step in its production was done in America. If one were to compare how much of a GM car is made in America vs. how much of a Toyota car is made in America, you would probably get very similar values. In both cases, many of the car's components are not made in either parent country, Japan or the U.S., as labor costs are extremely high in both places. Therefore, buying Toyotas instead of GMs does not contribute to direct loss of U.S. jobs. Instead, it contributes to a loss of business for a certain group of international suppliers while contributing to a gain in business for a different group of international suppliers. In America particularly, buying a Toyota instead of a GM car means a net loss of business in Michigan (GM's home) while the Deep South (home of Toyota's plants) gains business.

Hamid

Robin,
You have named them the best. Add to the list GTO and GT models, not to mention many previous Chevrolet models and so on. On the other hand, the only really Japanese "driver cars" are Mazda Miata, RX-8, and some Nissan/Infiniti models. Moreover the point of my argument was not to say which cars are fun to drive or boring, but the point is that American/European carmakers focus on RWD, which brings performance vs. Japanese that focus on FWD, which brings fuel economy and handling in some situations. It is not that Americans couldn't build fuel-efficient cars but that simply there was no need for it. The fact that oil prices have become so high does not have to do anything with Toyota's "vision."

My whole point is not only that Toyota (specifically) has many unfair advantages over American manufacturers but also the current situation turned in their favor--otherwise the ugly Prius is still laughable (ignoring the gas price).

And also having dozens and dozens of other vehicles is a simple business strategy to target various customers and segment the market.

Hamid

By the way, not everything in my apartment is American-made. I am a big fan of German and even some Japanese cars. I think Infiniti G is one of the best in its class. However, I never buy something from a company that--even though has a huge share of market--is still trying to push the nation's big industry to the edge and at the same time treat it as a friend. See: http://www.businessweek.com/magazine/content/07_10/b4024071.htm

ananth

I can only give my views based on the Indian scenario. Both Ford and Hyundai came to Chennai in 1996. The Hyundai car factory was ready by 1998 and it launched a vehicle, the successful Santro/Atos. Ford, in the meantime, was still building its plant and was going crazy about a car for India--numerous names and prototypes. It took another year at least, and then it launched the Ikon, an Indian-made car. Even today after Fiesta's launch, every month Ford production is two days Hyundai production.

GM has been hanging in there slightly, but now of late has become more proactive, better late than ever I guess, with its Aveo launch and now the Spark.

But the Japanese with Honda, Toyota, and now Nissan coming in are much more quicker and focussed.

Rajdeep

Looking at any customer survey from the last decade, we see that Toyota cars consistently have had some of the highest rankings.

I am not a Toyota groupie who will blindly cover up for anything it says or makes, but I have to root for the fact that Toyota makes better cars, more reliable cars, and more customer-friendly cars.

You can argue about benefits and legacy costs and currency valuations and government aid. But these don't make up for the facts that:
1. Toyota does make better cars.
2. Toyota has a better management approach.

I have visited two Toyota plants (if you can get to them, they provide you with a free guided tour), and the amount of detail they pay to their employees and the work they do is almost amazing. The plant vice-president told me that the supervisor of the line does not have a desk. Why? Because he is not supposed to be sitting at a place with a computer; instead, he is supposed to be close to the line, where he can solve problems.

Yes, they work hard (where don't they?). Yes, they are stressed (where aren't they?). But their attrition rate is one of the lowest, and worker satisfaction is among highest.

On health-care costs, the question is: Who created that mess? Back in the time when everybody would buy whatever Detroit made, when the CEOs of GM appeared on the cover of Fortune and the going was so good that dollars were being doled out irrationally in senior management compensation and workers' salaries and benefits (aided by UAW push). Now when the going gets tough, senior managers don't want to cut back salaries, and workers don't want to give up their benefits.

If you take away the problem of health-care costs, will GM start selling tons more cars everywhere? I doubt it.

Last point: Lots of analysts, writers, students, and publications are talking about Toyota becoming No. 1. Toyota merely sees this as a number it has encountered. It is not a race they have won. It is not about being crowned a champion of anything.

Mr. Doyle is discussing why Toyota is not a champion--or a champion with an asterisk. That is not even a point of view that Toyota worries about.

Karen

If the Big 3 had vision, they'd look backward. I'm driving a 20-year-old Japanese car that has beautiful styling and excellent gas mileage, and is extremely reliable. If GM cloned it, I'd buy a new one from them tomorrow, (assuming their customer service, including parts supply, improved as well). How about infrequent design changes so that parts don't become impossible to find? Think supply and demand. Listen up, folks: Those of you who bought into making your fashion statement with your new car--and are complaining about being strapped by car payments, gasoline, and maintenance costs--have no one to blame but yourselves. Likewise with the big new houses people can't afford to heat, cool, or even keep up with the mortgage payments on. Some people just don't have a clue about priorities.

J. Wesley

I'm somewhat surprised no one has mentioned anything about ethics in the car business. With consumers having been taken advantage of for years by the U.S car dealers, I can't help but believe that we have been praying for an alternative and it came in the form of the foreign automobile. The quality plus service is frosting on the cake.

PRODUCER

Unbelievable. All of the patriotic Debbie Downers on this thread need lessons in economics.

Have you ever heard of "The Tortoise and the Hare"? Many of us will agree that the Big 3 have approached the consumer market with a rabbit mentality: Make a fast buck on the SUV, damn the cars. The Japanese have taken a tortoise approach to the market: Slow and steady innovation, planning, and execution wins the race.

I live in Los Angeles, and consumers are voting with their dollars: Lexus, Mercedes, and BMW can't keep enough cars on the lot. Ironically, the so-called Big 3 have design studios here in Southern California so that they can be in touch with the hottest car market in the world. They should pack up and go home.

Karen

By the way, my 20-year-old car is a Toyota Camry. I'm committed to renew, reuse, and recycle, and the fact that my car was the No. 1 seller makes parts easily obtainable. I find it very disturbing that so many carmakers change designs so frequently, an obvious planned obsolescence plot. It contributes to extremely high insurance premiums. I have a marketing plan I think could turn the Big 3 around, but their business strategy appears much like Bush's invasion of Iraq. They're blind to fact that they're not invincible.

saad

Wow, almost all the comments given in this discussion were illuminating and thought-provoking. I'll add a couple of facts: We have a 19-year old Accord--runs beautifully in 4th (automatic), in fact. Can't say the same about new cars. Our second car is a Corolla diesel with 190,000 miles on the odometer--still running strong.

steve

I have purchased American nameplates on several different occasions, and the quality/reliability difference is striking between my current Toyota and former Ford and GM cars. There may be some advantages Toyota enjoys in terms of yen value, but overall, there is no comparison in quality and reliability. My favorite example is the radiators of my American cars needed to be replaced in 3.5 years, on average. I have yet to replace a radiator on either my 15-year-old Nissan or my current 11-year-old and 7-year-old Toyotas. Therein lies the problem with American cars. Any price advantage the American car has (in the form of discounting) at purchase is quickly dissipated over time in total cost of ownership.

Rolando

I think Honda makes the best vehicles. Toyota might have the best price/value combination but Honda provides much better machinery and quality. As a matter of fact, WTI is a copy of VTEC, and it's more economy-oriented.

Honda is not No. 1 in the world, because it has some pricing issues to be resolved. Toyota has now started to assemble cars outside Japan, and quality could become an issue.

Gareth Francis

Just to clarify, could someone confirm who makes the most cars per employee? Surely the fundamental argument here is that whoever has the higher car/employee ratio is the most efficient manufacturer. As long as you're making products that people want, they'll sell. It looks like Toyota is doing both and as a result, is the No. 1 auto manufacturer. Quite obvious really.

Car Guy

Detroit needs to stop whining.

Cars and trucks are not impulse purchases and cannot be sold by providing discounts and sales gimmicks to entice customers. U.S. nameplates need to make products that customers want to repeatedly purchase.

The average customer (apart from the ignorant few in the Midwest) in the U.S. is a lot smarter than the U.S. auto companies realize. If buying "U.S.-made" products was the only mantra customers followed, we would have naked (without clothes) individuals running around without a clue about the current time (no watches), or current events (no radio or TV)--since these products aren't made in the U.S. any more.

Having purchased a vehicle as a deal, over a period of time, customers realize the poor quality and stop becoming repeat buyers of Detroit brands. Once customers switch to a Toyota or Honda product, they realize the benefits and do not switch back.

Having worked in this industry both at the OEM and supplier level, I can attest to the shoddy practices prevalent. The problem lies with the leadership--not with engineering skills. After all, the two most successful companies, Toyota and Honda, employ engineers from the U.S. who conceive, design, and launch vehicles for the U.S. market. Ironically, most of this engineering talent has automotive experience with Detroit nameplates.

Instead of whining and complaining about issues, leaders at the U.S. nameplates need to spend more time defining long-term sustainable strategies and then committing themselves to implementation. Instead, leaders spend more time on coming up with short-term fixes that allow them to hang on to their jobs and retirement packages.

michael

Ford and GM are well on their way toward a sales gain strategy. The Ford Edge and Lincoln counterpart are very well done. The Fusion deserves more respect. The 2008 Malibu is a very nice package. Americans are lucky to buy such a car. The Aura, Solstice, etc. are winners. In fact, Ford and GM are doing very well in the cars that pass you. Look. They draw attention. I've driven American cars for years; they're dependable and bulletproof now, with improved quality and proper design and styling. The future looks interesting for the American nameplates.

dave

What are you people talking about--Toyotas are nice and reliable? They have more problems than Detroit-made cars. When you have to fix them, it costs a lot. They are ugly. What Toyota can you compare to an Impala or a Ford Fusion? The Camry has no style or looks whatsoever. The Yaris, that thing, is ugly. Look at the American economy--then you want to support another country's economy? Wow, you wonder why the U.S. is doing so poorly right now. They might build some Toyotas there, but a lot of the suppliers and parts come from Japan. They take their profit out of the U.S. I'm pretty sure GM world headquarters is in Detroit, not Tokyo. I don't know what you see in your Toyotas. There is nothing attractive about them.

Alfisti

Detroit needs to quit recycling its excuses for why it's having its head handed to them by foreign nameplates.

When I arrived in this country in the late 1960s, Detroit was still on top of the world. I drooled at the sight of split window Vettes, luxurious Continentals, and spacious Impalas. Nothing from overseas could rival them in their class for the money. Detroit possessed a huge advantage in term of technology, an established dealer base, and a loyal, patriotic customer base. If anyone had an advantage, it was Detroit. They've managed to let it all slip away through short-termism and mismanagement.

I remember going to a Ford car dealership in the 1970s. I went to open and close a rear door on an LTD, for it looked to be ajar by about an inch. Well, no amount of slamming caused the door to close flush. I then realized that the door had been misaligned at the plant. Incredible.

Then there was the bailout of Chrsyler, followed by a series of trade protections in the 1980s that favored Detroit. Claiming that Japan's markets were closed to U.S. cars, they pressured the Reagan administration to force the Japanese government to limit exports of cars and trucks to the U.S. They used a euphemism: "voluntary" export restraints. But that wasn't enough. Thinking it would buy them time and put the Japanese at a financial and supply disadvantage, they also demanded that the Japanese build cars in the U.S. to "even the playing field."

When new Japanese plants began springing up all over the South, Detroit's next excuse for why they weren't competitive was the "cheap yen." The U.S. government browbeat Japan to depreciate the dollar in what came to be known as the Plaza Accord. The resulting 30% rise in the Japanese yen instantly made all cars more expensive, and substantially cut into Japanese automakers' margins.

What should be obvious to astute observers by now is the fact that Detroit has had more than their fair share of government help over the last few decades. They've failed to capitalize on those unfair advantages, and the Japanese and other foreign car manufacturers have overcome those political obstacles to grow their market share.

So enough with the excuses. At the end of the day, Toyota and the other foreign nameplates would not have been so successful if consumers did not choose to buy them. In other words, build what the consumers want, and they will come. Otherwise, the U.S. auto industry will follow in the close footsteps of the British.

allen

Maybe the taste of the U.S. for cars is quite different from that of other people. Many American cars seem strange for persons from other countries, even the cars that are normally more strong and safe.

Love it or leave it

Let's put it all into perspective. Toyota "assembles" cars in the U.S. using parts made by other Japanese companies. Japan has, for years, lived off other peoples' ideas and spawned them as their own. The last original idea it had was to bomb Pearl Harbor. I would rather drive a Ford held together by rust than a new Japanese car. Every Japanese car spits on the graves of those 3,000 U.S. troops who paid the ultimate sacrifice for our freedom. How can anyone stand over that watery grave at Diamond Head and say, "Sorry you died for my freedom, but I just had to have this Toyota"? Principles only count when it is uncomfortable to stand by them. The very country that could not defeat us on 12/7/41 now holds each of us hostage economically. We are literally begging the guard of our prison to feed us. If the car I drive advertises for anyone, I would rather it advertise for the country in which I live and for the U.S. troops who die each and every day for my freedom. Japan will not open their own markets to allow the U.S. car companies to build plants and sell U.S. cars. No, they continue to ravage our nation. A recent study was conducted by an independent company in which it took a Toyota and a GM car and swapped out all the vehicle emblems, etc. that identified which was which. After more than 20 people test drove both cars, the majority chose the GM car, which they erroneously thought was a Toyota, as being the better vehicle. Americans who drive Japanese cars are selling their children's birth right, and they are too stupid to realize it. People put "Support our U.S. Troops" magnets on their Japanese cars and think they're such a good Americans. Wrong. All that tells me is that, in reality, they hate America because it is an insult to those U.S. Troops who died at Pearl Harbor. You either support all U.S. Troops or none. Even those who have died deserve our tribute, our respect, our homage. People say we won't forget what is happening in the Middle East, but we will. All too soon, we will be kissing the backsides of Arabs just like people kiss the backsides of the Japanese when buying their cars. Not me. Brown has never been my favorite color--I'll take red, white and blue.

Robin P

With that thinking, love it or leave it, you should be living in a cave. Think about it. Almost everything we live with is made by former enemies, even the language we speak. The Chinese supported the Communists in the Vietnam war and even killed American troops. Today it's darn hard not to consume some Chinese product, even that tilapia fillet at Wal-Mart. Great advances in technology and medical sciences that we all benefit from have been made by the Germans--even the atomic bombs we have were developed by scientists once working as our enemies. And speaking of atomic bombs, the bombings of Hiroshima and Nagasaki (which killed many more Japanese than the people who died in Pearl Harbor) haven't stopped Japan from consuming American goods. Good luck in your mission.

Love it or leave it

Robin,
There is an old adage, all is fair in love and war. Japan's attack on Pearl Harbor was not an announced war; it was done surreptitiously and thus, without honor. Last I knew, Germany and China have not bombed American soil. Japan continuously undercuts the price of their own vehicles simply in order to grab a larger market share from other car manufacturers. They actually sell their cars in the U.S. at a loss to accomplish that goal. If it were simply "quid pro quo" and the U.S.-made vehicles were allowed to sell in Japan without red tape and tariffs, which is what Japan enjoys in the U.S., it may be a different story.

Don't Forget Detroit

I'm from, and still reside in, the beautiful state of Michigan, and I would just like to remind the Detroit bashers of one thing. Even though Americans have forgotten the contributions of our auto industry, the rest of the world has not. In fact, when I was in college, the dozens of Asian international students I knew all told me that one of the greatest honors of their life was to take a picture next to the GM headquarters in downtown Detroit. That's right, it was one of the greatest honors of their life. In China, Buicks are a tremendous status symbol, and GM sells huge volumes of cars in Eastern Europe every year. It seems everyone appreciates American cars but Americans, even though it's this industry that gave hundreds of thousands of people their first shot at the American dream. Please remember that while Americans have forgotten Detroit, the rest of the world not only remembers but also is still to this day in awe of its greatness. We have taken our industrial heritage for granted. Please don't take our industries for granted. I for one do not feel comfortable with foreigners taking over yet another American industry.

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