Word: gm
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...develop their own hipster cars. Toyota is doing a bang-up job financially, forecast to post profits of $10.8 billion in its 2005 fiscal year, according to Prudential Equity Group. The company is gunning for 15% of the global market by 2010, which would most likely vault Toyota past GM as the world's largest automaker...
...GM's story is laced with warnings for its fast-rising rival. While GM is still the world's biggest automaker, its North American market share has slid for years despite costly incentive programs. Saddled with excess capacity and sluggish sales of all-new cars like the Pontiac G6, the company recently forecast a first-quarter loss of nearly $850 million. Highly profitable, full-size SUVs like the Chevy Tahoe risked looking like beached whales as record gas prices crimp sales and consumers shift to smaller models and hybrids made by rivals. (Until recently, GM dismissed passenger-car hybrids...
Perhaps most frustrating, GM's American factories are now nearly as productive as Toyota's U.S. plants, yet Toyota has the advantage of not having to pay health-care bills for a small city of retirees, population 340,000. One GM worker supports 2.65 retirees, adding $1,100 in "legacy" costs to each American-made vehicle, says Sean McAlinden, an economist at the Center for Automotive Research. While the Japanese government pays for most Toyota retirees in Japan, GM shelled out $3.6 billion to pay for retiree health care just last year. GM's turnaround plan is a high-wire...
...peril for Toyota is that it repeats GM's mistakes by overexpanding. With new plants in far-flung places from China to the Czech Republic, Toyota has added capacity for an additional 1.5 million vehicles a year by 2006, bringing annual production to 8.5 million vehicles. That's a lot of metal to move at a profit, and it's only getting tougher. Rising commodity and energy prices are increasing manufacturing costs. And looming interest-rate hikes, the bane of new-car sales, may make even today's volume tough to sustain...
...same time, Toyota is losing ground in the vehicle-reliability race. Hyundai last year nudged past Toyota (excluding Lexus) in J.D. Power & Associates' initial-quality survey. GM has narrowed the gap with models like the Buick Century. Even the indomitable Camry has slipped, dropping from first place in 2000 to eighth in 2004, as consumers report fewer problems with competing models. (Camry complaints aren't appreciably higher...