Word: toyotas
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Picture a Toyota engineer in a Stetson, munching on a corn dog, and you'll get a sense of how the company sees its future. Toyota is constructing its sixth North American assembly plant, in the heart of truck country just outside San Antonio, Texas, aiming to build the next generation of its full-size Tundra pickup there and--if all goes as planned--finally conquer the U.S. truck market. Achieving that feat would mark a milestone for Toyota in its quest to become the great American car company and would follow its conquest of virtually every other market segment...
...Toyota's truck plan illustrates not only the company's relentless drive but also the risks that accompany it. The Tundra is part of a massive increase in Toyota's global production that will have far-reaching repercussions for the firm's future and that of the entire U.S. auto industry. The history of the car business shows that bigger isn't always better: Toyota's top two rivals, Ford and General Motors, have struggled to make money despite leading in market share. Toyota, in contrast, has reeled in cash by controlling costs and focusing on vehicle quality...
...question, Toyota's rise is the envy of the auto business. Since 1999, Toyota's U.S. market share has grown from 10.6% to 14.7%. The company makes America's best-selling sedan, the Camry. Its fuel-sipping hybrids, like the Prius, are the hottest cars on the market, commanding premiums and long waiting lists. The folks who snickered when Toyota launched a youth brand, Scion, by importing funky compacts from Japan like the xB, are racing to develop their own hipster cars. Toyota is doing a bang-up job financially, forecast to post profits of $10.8 billion...
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...