honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser
Posted on: Tuesday, November 14, 2006

Toyota: Can it keep on truckin'?

By Joe Guy Collier
Detroit Free Press

Already the world's most profitable automaker, Toyota is on the brink of becoming the world's largest, too.

And this week, it opens a new plant in Texas to make a true full-size pickup — attacking a longtime bastion of dominance for Detroit automakers.

It could pass General Motors Corp. by the end of the year as the world's largest maker of cars and trucks. Toyota also is easily the world's most profitable automaker, netting as much every quarter as a Detroit automaker earns in a good year.

And even as Detroit automakers slow production and shutter plants in the United States and Canada, Toyota is adding more factories in North America. On Friday, Toyota marks a key milestone in its growing empire as it opens a $1 billion Tundra truck plant and supplier complex in San Antonio.

The San Antonio plant takes dead aim at a traditional stronghold, the full-size truck market where GM, Ford and the Chrysler Group account for more than 90 percent of U.S. sales. It marks Toyota's 13th plant in North America, with factories stretching from West Virginia to California to Mexico.

Next year, Toyota will add another plant in Lafayette, Ind., to make more Camrys, already the best-selling car in the United States. In 2008, it expects to start production at a new RAV4 plant in Woodstock, Ontario.

But Toyota's growth raises questions about just how much longer the Japanese automaker can continue to expand and what impact it will have on the rest of the auto industry.

QUANTITY AND QUALITY?

Can the Toyota system for efficient and exacting production be maintained as the company adds plants? Is it possible to be the biggest automaker and the best in quality?

These questions already are haunting Toyota executives, said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.

Toyota is a formidable competitor unlikely to slow down anytime soon, Cole said. But the company's management is well aware that as companies get bigger, the stakes are raised, he said.

A small player in the global marketplace 30 years ago, To-yota has steadily built its foundation, racking up staggering profits while much of the auto industry struggles. Just last week, Toyota ratcheted up projections for its current fiscal year, saying it expects to make $13.2 billion.

The U.S. market, where To-yota sales are increasing at a clip of 10 percent or more a year, will be a key driver for Toyota's financial success. GM, Ford and the Chrysler Group, meanwhile, are in various stages of turnaround plans. Sales are slipping for the year and profits will be slim, if they materialize at all.

HIGHER SCRUTINY

While Toyota still ranks at or near the top in most quality surveys, the company recalled nearly 1 million vehicles worldwide in May. Toyota President Katsuaki Watanabe apologized in September for an increase in problems and vowed to reinforce quality control.

Extra care is being taken before production launch of the truck plant in Texas. Hundreds of preproduction trucks, known as "training vehicles," are being built to make sure the system is sound.

"It's a very new game," Cole said. "When you're No. 1, you get a higher level of scrutiny."

The switching of places between GM and Toyota is expected to take place this year, according to worldwide production estimates by Global Insight Inc., a Lexington, Mass., economic research firm. To-yota's global production is expected to hit 9 million vehicles, edging out 8.7 million by GM.

Toyota will face a difficult fight winning market share from GM, Ford and Dodge, which have built strong loyalties among truck buyers, industry experts say. The truck market also has flattened in the face of high gas prices and a slowing market for home construction.

"This is far from a guaranteed home run for Toyota," said Global Insight research analyst Aaron Bragman. "This is probably one of the riskiest things they've done."