Toyota, Honda and Nissan are grabbing global market share

Tokyo November 4, 2004; Alan Ohnsman writing for Bloomberg Asia reported that Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., Japan's three biggest auto companies, also are making money on selling cars. General Motors Corp. and Ford Motor Co., the world's largest and third-largest auto producers, are relying on loans and leases to make up for losses on cars.

"The Japanese are gaining market share everywhere," said Peter Boardman, an analyst with Los Angeles-based NWQ Investment Management, which manages about $14 billion. "That's been because of gains in North America, but now they're also growing in Europe."

Toyota, Nissan and Honda are posting higher global sales, and individually earning more than General Motors, Ford, Volkswagen AG and DaimlerChrysler AG. This has given the Japanese carmakers more money, at least $31 billion in cash at Toyota, to invest in new types of autos, develop hybrid-electric and fuel-cell vehicles and add or enlarge plants, ensuring future gains.

Japan's Big Three sold a combined 3.32 million cars and light trucks in the U.S., the world's largest market, this year through September, up 8.5% from a year ago. Flat sales for Honda restrained overall gains for the three carmakers, which held 26% of the U.S. market, a 1.8 percentage-point gain.

Total U.S. sales rose 1.3% in the first nine months, weighed down by a combined sales drop of 0.3% for General Motors, Ford and DaimlerChrysler's Chrysler, which together sold 7.59 million vehicles. Their collective market share slipped 1 percentage point to a record low for the period of 59.1%.

The Japanese carmakers posted declines in net income in the latest quarter. Shares of Toyota gained 13% this year as the company's U.S. sales rose 9.4%. Shares of Honda increased 8%. Shares of Nissan fell 5.6%.

Stuttgart, Germany-based DaimlerChrysler's shares fell 11%, while shares of Ford, based in Dearborn, Mich., are down 17% in 2004. Shares of Volkswagen, based in Wolfsburg, Germany, dropped 20%, and shares of Detroit-based General Motors tumbled 26%.

Worldwide, the Japanese carmakers probably will post the biggest sales gains this year, according to forecasting firm Global Insight. Toyota's sales should rise 7.6% to 7.29 million units in 2004, topping Ford by more than half a million. Honda's may rise 8.6% to 3.17 million, and Nissan's should reach 3.14 million, up 7.9%, the Lexington, Mass.-based firm estimates.

That compares with 2.2% growth for General Motors to 8.52 million this year, a 0.2% increase to 6.47 million for Ford and 3.7% by DaimlerChrysler to 4.19 million, according to Global Insight.

In the quarter that ended Sept. 30, net income for Toyota, Nissan and Honda together exceeded $5 billion, more than double the $1.9 billion for General Motors, Ford, DaimlerChrysler and Volkswagen.

With its $31 billion reserve of cash and marketable securities, Toyota has more available funds for future growth and lacks the pension and health insurance obligations of General Motors and Ford.

"The Japanese automakers have an advantage because they know how to keep costs down in markets like the U.S. and can apply that as they expand in other markets," said Atsushi Osa, who helps manage about $110 billion for Sumitomo Mitsui Asset Management Co. in Tokyo.

This year's annual efficiency study by Harbour & Associates, ranking the most productive auto plants in North America, again found that Toyota, Nissan and Honda on average need less time to build a vehicle than General Motors, Ford or Chrysler, an edge they've maintained for more than a decade.

"The big Japanese had an average production cost advantage of $200 to $300 per vehicle compared with the U.S. Big Three," said Harbour analyst Laurie Felax. "GM and Ford are reducing output at several facilities; meanwhile you've got Toyota, Honda and Nissan operating plants at very high utilization rates."

The overall cost advantage for Asia's largest automakers in the U.S. may be closer to $3,000 per vehicle, said Koji Endo, a Tokyo-based auto analyst for Credit Suisse First Boston.

"A big question mark is how long can they continue to enjoy such a big cost advantage relative to the U.S. Big Three?" Endo said. "About $1,500 of the difference is for health care and pension costs, and that will not really disappear any time in the near future. The remaining $1,500 is a pure productivity differential."

That cost advantage is one reason General Motors and Ford "have to sell their vehicles with at least $3,000 of incentives just to be competitive on price," Endo said.