Toyota Plans to Produce 9 Million Vehicles Next Year, May Surpass GM

NAGOYA, December 20, 2005; Yuri Kageyama writing for the AP reported that Toyota said today it plans to produce 9.06 million vehicles in 2006, threatening to overtake struggling U.S. rival General Motors as the world's biggest automaker.

Although General Motors does not give full-year production targets, Toyota's forecast will put it neck-and-neck with GM and possibly allow Toyota to take the lead. GM produced 6.7 million vehicles during the first three quarters of this year and expects to produce about 9 million vehicles this year.

Toyota Motor Corp., Japan's top automaker, has been growing at a time when General Motors Corp. has been stumbling, losing $1.6 billion in the third quarter and seeing its market share in North America chipped away by Asian automakers, including Toyota.

Toyota's production target, announced by President Katsuaki Watanabe at a news conference in Nagoya, central Japan, marks a 10 percent increase from the 8.25 million vehicles Toyota expects to produce this year.

Like Toyota, other Japanese automakers, including Honda Motor Co. and Nissan Motor Co., are also in good health.

Honda said Tuesday in Tokyo that it projects global sales in 2005 will have risen 5 percent from a year earlier to a record 3.35 million vehicles, while vehicle production worldwide will have gone up 7.2 percent from last year to 3.41 million cars.

Koji Endo, auto analyst with Credit Suisse First Boston in Tokyo, believes that Toyota is strong because it has ample money to invest in facilities and research that in turn allows it to produce cars that appeal to the market and cut costs, thereby producing more profits.

With Toyota booming on a "positive cycle" of healthy sales leading to more sales, it's definitely on track to overtake GM in annual vehicle production, he said.

"It's bound to happen either next year or the year after," Endo said. "But perhaps there isn't much point to the question. It doesn't make much sense to be comparing vehicle production numbers between the world's most profitable automaker and one that's on the verge of collapse."

Toyota said it expects to sell 8.85 million vehicles worldwide next year, up 9 percent from 8.09 million estimated for this year.

When not including its subsidiary automakers Hino and Daihatsu, Toyota plans to produce 8.11 million vehicles next year, up 10 percent from 7.37 million vehicles in 2005.

Watanabe played down Toyota's possible imminent No. 1 status in the world auto industry.

"We try to prepare our production and sales to respond to customer needs in every region," he told reporters. "I am not thinking much about whether we will become No. 1 in the world as a result of that."

Watanabe also brushed off fears about a possible U.S. political backlash of protective sentiment that intensified in the 1980s, noting that Toyota has boosted production and parts purchasing in the United States, and become a good corporate citizen.

"I do not anticipate trade friction to grow into a major problem at this time," he said.

Peter Morici, University of Maryland economist and auto industry expert, believes that GM, Ford Motor Co. and the United Auto Workers, the U.S. labor union, do not enjoy much public sympathy, compared to the 1980s.

"I do not believe the U.S. public will support protection for GM. If the government does it, it will have to be veiled," he said.

Detroit-based General Motors has announced drastic cost cuts, including trimming 30,000 jobs, or 27 percent of its North American manufacturing jobs, and the closure of 12 facilities by 2008.

GM's U.S. market share fell to 26.2 percent in the first 10 months of this year compared with 33 percent a decade ago, the result of increasing competition from Asian rivals. Standard & Poor's Ratings Services lowered GM's debt to "junk" status earlier this year.

GM isn't the only U.S. automaker cutting costs.

Ford Motor Co., which reported a third-quarter loss of $284 million, has said it plans to eliminate about 4,000 white-collar jobs in North America early next year as part of a restructuring plan.

Ford Chairman and CEO Bill Ford has said he plans to announce U.S. plant closings and layoffs in January.

Watanabe said Toyota has succeeded because it followed its dream of being the first in the world to produce the best cars at the lowest costs. And Toyota isn't about to sit on its laurels, he said.

"It's critical we maintain our spirit of perpetual challenge," Watanabe said.