In Depth February 11, 2010, 5:00PM EST

How Detroit Can Gain from Toyota's Recalls

GM and Ford have an opportunity to steal buyers from a bloodied Toyota. The trick is not to seem predatory

By David Welch, Keith Naugton and Burt Helm

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Benavides tries out a Chevy Tahoe after planning to buy a Toyota Sequoia Matthew Gilson

The pitch was so ballsy, it bordered on the laughable. An American automaker that had just emerged from bankruptcy—an endlessly beleaguered outfit that for years had been unable to build cars people wanted to buy—was launching an ad campaign that boasted, "May the Best Car Win." It was September 2009, and General Motors was in danger of leading with its chin. Robert Lutz, then the company's marketing chief, decided it was time to shock consumers. Lutz felt Americans weren't giving GM enough credit for making cars that were as good as the Japanese competition. He was proud of his new Chevrolet Malibu, his Buick LaCrosse, and his Cadillac CTS. What could be gutsier than comparing Chevys to Toyotas and Buicks to Lexuses?

Car companies have been bragging about themselves and running down their rivals forever. But it's harder to do when 61% of your company has been pawned to the federal government. GM Chairman Edward Whitacre Jr. agreed with Lutz anyway, and greenlighted the campaign created by McCann Erickson. And the GM ads that seemed so risky last summer came to seem prescient last month when Toyota Motor (TM) stumbled into the worst crisis in its history: more than 8 million cars recalled worldwide, plummeting sales, and a U.S. government investigation into whether the company should have moved faster to correct the mechanical problems of its automobiles.

UNPRECEDENTED OPPORTUNITY

When was the last time an American carmaker caught a break? More to the point, how often does one of them create its own good fortune? Both have been rare. No one could have predicted that Toyota, the company that invented kaizen , or continuous improvement, would flame out over quality. But now that it has, GM, Ford (F), and even Chrysler have an unprece- dented opportunity to grab Toyota's customers. It won't be clear for some time how badly the recalls have hurt the Toyota, Scion, and Lexus brands. And Toyota, still a great company at its core, will doubtless recover some of its sheen. But it's probably fair to say that consumers will never again look at the world's largest automaker the same way.

So what's it going to be, Detroit? How far are you willing to push this? Many consumers may find it unseemly for Ford or GM to trash a bloodied competitor, even one suffering from self-inflicted wounds. That's why it's so significant that GM cooked up this approach six months ago; a company executive acknowledges that they wouldn't have dared launch the campaign after Toyota started the recall. At a moment when the industry is packing vehicles with more and more glitch-prone computers, Ford or GM could easily find themselves trapped in recall hell tomorrow. And although history may be filled with instances of companies grabbing share when their rivals are stumbling and distracted, the tricky part is doing so without appearing predatory. "Disparagement or gloating," Lutz wrote in an e-mail, "will only trigger a sympathy backlash in favor of Toyota."

For Detroit, the good news started sneaking into town in the late aughts. It showed up first at the Dearborn (Mich.) headquarters of Ford, when Alan Mulally, high-flying Boeing (BA) executive and Lexus driver, became Ford's CEO in September 2006. Mulally had studied Toyota for years and instilled its manufacturing and product development principles into Boeing's aircraft assembly. Now it was Ford's turn. Three months into the job, he made the industry equivalent of a state visit to Toyota City to see how Ford might emulate the automaker he called "the master." Upon his return, he called Toyota "the finest machine in the world, the finest production system in the world."