Can GM win back sales supremacy from Toyota?

Image:
Vehicles damaged by the March 11 tsunami waters sit lined in a Toyota parking lot at the Sendai port, Miyagi Prefecture, northeastern Japan. Toyota is expected to see a significant decline in output as a result of the disaster.Wally Santana / AP

As they moved north into the unknown, the team filled the trunks of their cars with whatever food and water they could find. They had no idea what they might soon face, and indeed, they spent the next few days sleeping inside their cars, surrounded by desolation.

This is not a scene from the war in Libya. Rather, it is a description of the earthquake-and-tsunami-ravaged plains of northeast Japan, where a group of General Motors purchasing department managers were assigned in the days after the March 11 natural disaster struck.

The giant automaker quickly recognized that it was nearly as vulnerable to the impact of that disaster as its Japanese rivals. The field teams were assigned to connect with key GM suppliers and find out which ones, if any, were still up-and-running, and which one were likely down for the long-term, or might be able to get back into operation with some help.

The strategy appears to have minimized the impact on GM, which has faced only moderate disruption from the disaster compared with its Japanese competitors — especially the industry giant Toyota.

The global sales leader reports it lost more than 542,000 units of production during March alone at both its domestic and foreign-based assembly plants. Toyota’s U.S. “transplant” lines are currently operating at just a third of their normal capacity due to parts shortages, and the carmaker says its global production network might not be back up to speed before November or December.

Indeed, on Monday news reports said Toyota may slip to third in the automaker production rankings behind GM and Volkswagen due to the earthquake and subsequent nuclear crisis.

That would be a devastating blow to Toyota and a particularly bitter setback for its CEO Akio Toyoda who, just two days before the earthquake, had outlined his “Global Vision” for the automaker. The strategy was designed to reverse the setbacks of the previous 18 months during which Toyota had been slammed by a series of safety scandals. Toyoda proclaimed a goal of boosting 2010 sales of 8.42 million to at least 10 million by mid-decade.

But today it seems clear that the automaker is unlikely to even come close to last year’s sales numbers. Estimates vary, but Toyota could lose 1 million or more units of planned production “depending on how aggressive they are” once things are back to normal, noted Jim Hall of Detroit’s 2953 Analytics.

That would be good news for GM on a number of levels. There are the bragging rights, of course. The U.S. automaker dominated the global auto industry for 75 years only to see Toyota sweep past it in the months before GM was forced to file for Chapter 11 bankruptcy protection.

Last year, Toyota was hammered by a variety of problems, including a temporary shutdown of a number of its plants while it found a replacement for potentially defective accelerator pedals. Even so, as the books closed on 2010 Toyota was still in the sales lead (by 30,000 units — that’s barely a day’s production, it turns out).

It’s still far too early to tell how things will shake out by year-end, of course, and Toyota officials aren’t ready to accept defeat, but “GM has a better than odds-on chance of making it to the top again,” suggested Joe Phillippi of AutoTrends Consulting.

Of course, the immediate question is: So what? There’s little evidence that the public is influenced to any great degree by the sales charts, although industry marketers are fond of talking about the role that sales momentum plays for a company.

But Toyota’s setback could play to GM’s advantage in other ways. Jesse Toprak, a researcher with TrueCar.com, reports that prices on Japanese-made products have been rising since the quake rocked Japan — nearly $3,000 per vehicle on some key models like the Toyota Prius, the world’s most popular hybrid-electric car.

There’s no sign that there’ll be a reprieve for buyers as long as those products are in short supply, and Mike Jackson, CEO of the giant retailer AutoNation, predicts that his chain’s outlets could see inventories drop by half in the coming months. The question is whether potential Toyota customers will wait — or simply pay the premium.

“We have seen a big deterioration of loyalty for Toyota,” cautioned Art Spinella, of Oregon-based CNW Marketing.

Putting it more bluntly, “They’re going to walk,” warned 2953 Analytics’ Hall. “Savvy consumers are going to walk. They don’t wait [especially as] there are a lot of new choices.”

Few expect the Prius to lose its luster, especially with fuel prices again approaching record levels, but other Toyota products appear vulnerable. The compact Corolla, in particular, faces an array of well-reviewed new competitors, including the all-new Chevrolet Cruze, as well as Ford’s latest Focus and the updated Hyundai Elantra.

Complicating matters, Toyota is shifting resources to focus on its strongest models — like the Prius — potentially sacrificing other models. It has even delayed several potentially promising launches, such as the Prius V, a new hybrid that was meant to inaugurate a new Prius brand-within-a-brand, as well as the micro-compact Scion iQ.

“The iQ launch will be later than we originally planned,” Scion’s General Manager Jack Hollis announced at the New York auto show last week. A company source later said that the delay is currently indefinite.

For its part, GM has faced a couple minor setbacks, including a brief closure of a plant in Louisiana for which there was already an over-supply of slow-selling compact pickups.

That’s not to say there won’t be further setbacks for GM, as the U.S. carmaker uses a number of Japanese suppliers. But GM has set up three war rooms — in Shanghai, Tokyo and Detroit — with over 200 employees assigned to monitor and keep parts supplies flowing and, if necessary, hunt down replacements.

Detroit’s automakers “are facing more opportunities than they know what to do with,” noted analyst Hall. He also warns that Toyota won’t be an easy target forever.

CEO Toyoda hasn’t abandoned his grand Global Vision; he’s just been forced to delay it, Hall said. And if GM, in particular, doesn’t take this opportunity to build up a solid lead, getting named king-of-the-hill again in 2011 will likely be only a temporary victory.