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Sales signal Toyota is ready to make a pass

The Japanese automaker outsells GM in the first three months of 2007.

By SCOTT BARANCIK
Published April 25, 2007


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General Motors has been the world's No. 1 automaker for 76 straight years. But its historic reign may be over.

For the first time, Toyota Motor Corp. has outsold GM. The Japanese company unloaded 2.35-million cars and light trucks during the first three months of 2007 vs. GM's 2.26-million, and industry watchers say the gap is unlikely to close by year's end.

The news is largely symbolic. Toyota, whose models include perennial performers such as Camry and Corolla as well as newer ones like the Tundra truck and Prius hybrid, has been gaining market share by the fistful for years while GM's shrinks. More importantly, Toyota is profitable, while its struggling competitor is not.

Indeed, Wall Street reacted lazily Tuesday, sending GM's stock up 10 cents, to $30.77 per share, and bumping Toyota's down 98 cents, to $123.89.

But for GM retirees like Marian Fabi of Indian Shores, who worked alongside her husband for 30 years at a Cadillac factory in Detroit, Toyota's breakthrough numbers were another painful reminder that America's dominance of the global auto market is past, not prologue.

Though Fabi, 76, says she and other United Auto Workers members have tried to teach their children the importance of buying American cars, many don't listen. Her own daughter drives a Volkswagen because it's economical. Her son recently came around, but he, too, used to own foreign cars.

Which says a lot. Fabi's 80-year-old husband, Fred, chairs a drop-in center for roughly 3,000 UAW retirees in Pinellas, Hillsborough and Manatee counties.

Koji Endo, an auto analyst with Credit Suisse in Tokyo, sees Toyota's edge differently. "Toyota sales are booming because of its good image around the world about reliability and ecological technology," he said. "It's just the opposite for GM."

Not everything is as it seems in the global auto market. Though UAW members bemoan the fact that Toyota's U.S. factories are not unionized, Toyota is adding jobs -- it expects to grow to 15 U.S. plants by 2010 from seven -- at the same time GM is negotiating severance packages for thousands of workers. Some foreign-owned carmakers use more domestic parts than U.S.-owned carmakers do. And GM sells three-fifths of all its cars overseas.

GM first became the global sales leader in 1931 and barely looked back for seven decades. But a combination of inattention to quality, strained labor relations, adverse regulatory decisions and a slowness to recognize the potential for small cars eroded GM's seemingly insurmountable lead starting in the mid 1960s.

Even Marian Fabi notes that Cadillacs, though still "superb," are made with cheaper materials than they used to be.

In the United States, GM retained a 23.3 percent to 15.7 percent market share advantage over Toyota in the first quarter. But that was GM's smallest stake since at least 1925, and that was with help. According to Edmunds.com, GM offered U.S. customers an average incentive of $2,700 per car vs. $1,000 at Toyota.

Moreover, GM is losing out to Toyota in trend-setting U.S. cities like Los Angeles, Miami and New York. "People in Des Moines Iowa want to drive what's hot in L.A.," Russell Winer, a marketing professor at New York University's business school, told Bloomberg News this month.

Toyota is no overnight success. Founded in 1937 by the Toyoda family, its vehicles had become the industry standard for quality and reliability by the 1970s and 1980s. More recently it has built a reputation for technological leadership, such as with its hybrid cars.

"They've been offering people a vehicle that's inexpensive to operate, doesn't break down, and has good resale value," said Paul Fancone, a salesman at Autoway Toyota in Pinellas Park.

Still, Toyota officials remain leery of praise or attention. They fear trade restrictions and other forms of backlash that can come with success, including from consumers like Marian Fabi, the former GM worker.

"In Dearborn, the town I lived in, you drove a car that wasn't American-made, you got your tires flattened."

Times researcher Carolyn Edds contributed to this report, which used information from Times wires. Scott Barancik can be reached at barancik@sptimes.com.

[Last modified April 25, 2007, 01:43:36]


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