Toyota's Closing In

TOKYO -- Looking at the year ahead, there's no stopping Toyota.

Analysts say 2007 could be the year the Japanese manufacturer surpasses General Motors Corp., the world's No. 1 automaker in vehicle sales.

Soaring oil prices have drivers around the world snatching up gas- saving Toyotas with a reputation for reliability, like the Camry -- the best-selling car in the U.S. nearly every year since 1997 -- and the Corolla, the world's best-selling car.

Toyota Motor Corp., which passed up Ford Motor Co. as the world's No. 2 automaker in annual sales in 2003, is opening new plants in Russia, Thailand and China next year to keep up with demand.

"Everything is going right for Toyota in every way possible," said Yasuaki Iwamoto, auto analyst for Okasan Securities in Tokyo. "Toyota has carved out a reputation for reliability and quality."

Toyota expects to sell 8.85 million vehicles globally this year. It won't announce vehicle sales targets for 2007 until Dec. 22, but has said it aims to sell 9.8 million vehicles in 2008.

General Motors Corp. doesn't give vehicle sales targets but sold 9.17 million vehicles globally last year, the second-largest volume in company history.

Toyota is expecting a $13.4 billion profit for the fiscal year ending March 2007. It posted a $11.8 billion profit last fiscal year, the fourth straight record income for Toyota.

GM's situation couldn't be more different. The U.S. automaker is undergoing massive restructuring after racking up more than $10.6 billion in red ink last year and losing $3 billion the first nine months of this year.

The company said it won't make decisions to keep its No. 1 status. "We're focused on remaking GM into a more competitive, leaner company that can generate profits on a sustained basis," said spokesman Brian Akre. "We won't alter our North America turnaround plan or sacrifice our profitability for the sake of one superlative."

In the U.S., Toyota is encroaching on GM's turf. A decade ago, GM controlled about a third of the U.S. market while Toyota had barely 8 percent. Today, GM's share has dwindled to 24 percent. Toyota's zoomed to more than 15 percent.

Tops in dependability

This year, Toyota won top honors in eight of 19 categories in a J.D. Power and Associates vehicle dependability study -- more than any other company. Toyota's Lexus luxury brand was the top-ranked nameplate for the 12th year.

And with the renewed consumer interest in environmentally- friendly cars, Toyota has done well with its Prius hybrid, which went on sale in 1997 and delivers about 51 miles per gallon.

Toyota officials say beating GM isn't on their minds.

"Our goal is to become No. 1 with the customer," said Toyota spokesman Paul Nolasco. "The increases we are experiencing in production and sales is simply a reflection of consumer demand."

But Toyota has seen its reputation take a hit recently in a rise in recalls, partly as a result of successful cost-cutting that involves many models' using the same parts.

Although Toyota's production methods are emulated by other companies and studied at universities, it has been struggling lately to maintain quality as it expands production -- a sign of possible danger ahead. President Katsuaki Watanabe has repeatedly promised to beef up quality controls.

To keep up with the burst in demand, Toyota will be opening new plants next year.

Its first auto plant in Russia will start producing the Camry. Toyota will open its third plant in Thailand to produce a pickup truck. A new plant in China will produce a compact that Toyota has yet to unveil.

In the U.S., the first Tundra pickup trucks rolling out of Toyota's Texas plant will arrive in showrooms in 2007, a sign of Toyota's ambitions in a lucrative sector dominated by American automakers.

Another contrast can be seen in the companies' relations with workers.

Over the years of growth, Toyota has never resorted to layoffs, vowing never to repeat the massive voluntary retirements that came during troubled times in 1950, and has won worker loyalty in return.

Toyota is among the exceptions among major Japanese companies in that policy.

GM, meanwhile, has been negotiating severance packages, including early retirements and buyouts, with thousands of workers during this past year in an effort to turn around its North American operations.

Bill Schwartz of TBM Consulting, a Durham, N.C.-based company that teaches Toyota production methods to corporate clients, says Toyota has been building its business for decades and is now almost certain to beat GM in attracting buyers: "It's unavoidable it will happen soon, and it will very likely happen next year."

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