Profit more important than sales for GM

Sales are so strong at Victory Toyota that it opened a gleaming new 38,000-square-foot showroom in February.

The dealership in the Detroit suburb of Canton Township has thrived even though it's only a short drive from the corporate offices of General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group.

The fact that Victory can win in an area so closely tied to the Detroit Three is to a large degree symbolic of GM's troubles in its home country, and it illustrates why the Japanese automaker was able to pass GM as the world's top auto seller in the first quarter of the year.

"We are still attracting the Big Three customers," said Ruben Dunlap, Victory Toyota's business development manager. "People are willing right now to pay a little bit more for the quality."

Toyota Motor Corp. announced Tuesday that it sold 2.35 million vehicles worldwide in the January-March period, surpassing the 2.26 million vehicles GM sold in the quarter, according to preliminary figures. It means that Toyota passed GM on a quarterly basis for the first time, and many analysts predict it will beat GM in sales and production for the full year.

GM says it's more concerned about making money and advancing its turnaround plan. Although its sales set records in the rest of the world so far this year, the company has sputtered in North America. Through the first quarter, its U.S. sales were off 5.5 percent, while Toyota's sales went up 11.2 percent largely because of its reputation for making quality fuel-efficient vehicles, reports.

In 2006, Toyota's global output rose 10 percent to 9.018 million vehicles, while GM and its affiliates produced 9.18 million vehicles worldwide — a gap of about 162,000. In the first quarter, Toyota made 2.37 million units while GM had expected to produce 2.34 million during the same period, and has not given a final number.

Analysts say Toyota is building on its lead by investing in ecological technology, opening plants around the world, developing new models and wooing drivers with solid marketing that drives home its brand power.

Those are precisely areas in which GM has fallen behind Toyota, analysts say. GM will be hard pressed to play catch-up, making it more likely that Toyota will outstrip GM for the full year, they say.

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

GM said although Toyota won the first quarter, the fight for global leadership is not over for the year. A company spokesman said it would not chase market share solely to recapture the lead from Toyota, and it has no special plan to retake the lead, the AP reports.

In a sense, however, G.M. has done that. One reason Toyota was able to squeeze by G.M. is that the Detroit company, like Ford, is deliberately cutting back on its unprofitable bulk sales to rental car companies, which have helped push down the prices of its cars and hurt their resale value.

As soon as G.M. made clear that it was taking that step, “we knew it was coming,” Paul W. Smith, host of a popular show on WJR-AM in Detroit, said of Toyota’s ascension.

Mr. Smith, whose show has featured interviews with Mr. Wagoner, as well as officials from Toyota and the U.A.W.’s president, Ron Gettelfinger, added: “I think people are getting a sense for how bad it is.”

But Detroiters, he added, often are not aware of how little Americans care about the plight of their city, something he has learned on his regular stints filling in for Rush Limbaugh on his national radio show, the New York Times reports.

Source: agencies

Prepared by Alexander Timoshik

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Author`s name Alex Naumov