December 23, 2006

Toyota Is Poised to Supplant G.M. as World’s Largest Carmaker

DETROIT, Dec. 22 — After 75 years, the world automobile industry is about to get a new No. 1.

The Toyota Motor Company of Japan issued a 2007 forecast Friday that would make it first in global sales, ahead of General Motors, which has been the world’s biggest auto company since 1931.

Toyota, which had not even built its first automobile back then, expects to sell 9.34 million vehicles next year. That would exceed the 9.2 million vehicles that G.M. expects to sell worldwide this year.

G.M. has not issued its own forecast for 2007, but it is on a downward trajectory, closing factories and eliminating thousands of jobs, both in the United States and Europe.

Toyota, meanwhile, is opening factories and hiring more workers around the world to keep up with growing demand for its vehicles.

Toyota’s dethroning of G.M. has been anticipated for some time. The first inklings of it came three years ago, when Toyota issued a series of goals for 2010 that would put it ahead of where G.M. was at the time.

But Toyota’s ascension is nevertheless remarkable for the simple reason that the carmaker has reached the top by borrowing many ideas from the American car business early on, only to improve them.

Even the first Toyota, the AA, introduced in 1936, was based on a Chevrolet. Toyota executives also spent months in the 1950s studying factories at the Ford Motor Company. In the same vein, their first American factory was a joint venture with G.M. in California.

Later on, Toyota followed American auto companies into making minivans, sport utility vehicles and luxury cars, straying from Japanese automakers’ original focus on fuel-efficient small cars.

But Toyota departed from the Detroit model in a critical way. Where G.M.’s leaders followed the philosophy of “a car for every purse and purpose” set down by its president, Alfred Sloan, in the 1920s, Toyota has offered a limited lineup of vehicles for which durability and reliability were of paramount importance.

Often criticized because its vehicles were too conservative, Toyota cars like the Camry and the hybrid-electric Prius are now often held up as models for G.M. and other Detroit companies to emulate.

“As far as pride, it hurts,” said Ricardo Yrlas, 52, an assembly line worker at G.M.’s truck factory in Flint, Mich., one of the last remaining G.M. plants in a city where half the residents once worked for the company.

But Ford’s new chief executive, Alan R. Mulally, readily says he is an avid student of Toyota, something no Detroit leader in the past would admit.

For American consumers, Toyota vehicles have been “a better value proposition” than Detroit’s products, said Mr. Mulally, who owned Toyota and Lexus cars before joining Ford in September.

Already the industry’s richest player, earning more than $12 billion in profits last year, Toyota has the cash to invest heavily in new technologies and products, forcing its competitors to keep pace or fall farther behind.

But Toyota, for its part, took pains to avoid any appearance of celebration Friday. The company’s results are “wholly in thanks to the support of our customers in every region around the world,” said Toyota’s chief executive, Katsuaki Watanabe.

Toyota’s largest market will remain the United States, where sales are expected to rise 6 percent to 2.68 million vehicles in 2007.

Speaking in Nagyoa, Japan, near Toyota’s headquarters in Toyota City, Mr. Watanabe cautioned that economic conditions, like rising oil prices and instability in the Middle East, could interrupt the company’s climb. “There are grounds for concern,” he said.

Another perpetual concern at Toyota is protectionism. In the 1980s, the United States and European countries imposed limits on Japanese imports, moves that prompted Toyota to join other Japanese auto companies in building plants outside Japan.

Those threats are a reason Toyota has aggressively stressed its desire to be a good local citizen, supporting community programs in places like Georgetown, Ky., and San Antonio, where it opened a new truck plant last month.

“If Toyota overtakes G.M., that is a very big deal,” said Mark Hawkins, chairman of the United Automobile Workers union local at G.M.’s Flint truck plant.

G.M. and the union need to work together to at least try to prevent Toyota from displacing G.M., Mr. Hawkins said, because he worries G.M. would never be able to take back the top spot after losing it. “Right now they’ve got a lot of momentum,” Mr. Hawkins said of Toyota.

Representative John Dingell, a Michigan Democrat who will probably become chairman of the House Energy and Commerce Committee next year, said Toyota’s strength came in part because it did not have to pay the full cost of health care coverage, a major burden for Detroit companies, and because it has benefited from the strength of the Japanese yen.

“If Toyota’s worldwide production surpasses General Motors, it will simply provide further evidence of the need for the U.S. government to pursue policies that maintain and strengthen the U.S. industrial base,” Mr. Dingell said in a statement Friday.

A bigger concern for Toyota, however, may be its vehicles’ quality. The automaker has been embarrassed this year by a spate of recalls, prompting it to begin a companywide investigation into the causes.

Mr. Watanabe, who made global headlines this summer when he bowed low in apology for the defects, expressed his regrets again in Nayoga on Friday. “I believe it is vital that we faithfully hold to our belief that no growth can come without improving quality,” Mr. Watanabe said,

Yet that growth may be inevitable, at least in the view of Ford, which Toyota passed in global sales to take the world’s second spot in 2003. Internal forecasts at Ford, which came to light this week, show Toyota will unseat it as the second-biggest player in the United States next year.

Looking back now, at least one former G.M. manager said he saw this moment coming.

“We figured that we were going to have a problem,” said Tom Lynch, who retired from G.M.’s Parma, Ohio, parts plant in 1987. He often gave plant tours to visiting Japanese executives.

“We taught them how to beat us,” he said.

Micheline Maynard reported from Detroit and Martin Fackler reported from Tokyo. Nick Bunkley contributed reporting from Detroit.