LOS ANGELES -- General Motors Co., less than two years after declaring bankruptcy, is poised to reclaim the global auto sales lead from a Toyota Motor Corp. rattled by both natural disasters and reports of slipping quality.
More surprising is that GM may retain the top spot after auto-parts production in Japan recovers from the March 11 earthquake.
Improved products and China's booming auto market are boosting GM. The automaker plans to invest at least $5 billion in China to double sales to 5 million vehicles by 2015. After years of losing ground in the U.S. to cars like Toyota's Camry, GM's Malibu has won better reviews and a new version is coming.
Add it up and GM may retake the sales crown lost in 2008, when the U.S. automaker lost $30.9 billion and sought a federal bailout following Toyota's most profitable fiscal year.
Today GM is on the mend while Toyota confronts a slumping reputation, a stronger yen that hurts profit on U.S. sales, and the prospect that its production in Japan won't recover until November.
"It's safe to say that GM is crawling back in the mature markets and growing quickly in emerging markets," said Jeff Schuster, executive director of forecasting for J.D. Power & Associates, a research firm in Westlake Village, California. "It's a challenging road ahead for Toyota. They face some real issues in the U.S."
Toyota President Akio Toyoda in March said he would start a campaign to rebuild the company's image in the U.S. following recalls that totaled more than 10 million vehicles.
Toyota had to repair the cars because sticking accelerator pedals and faulty floor mats led to some sudden acceleration claims.
Toyota this week plummeted to 43rd place from No. 20 in a Harris Interactive's annual poll assessing the reputation of 60 corporations.
Rivals catching up
Even before the recalls, auto critics were saying the competition had started catching up to Toyota. Edmunds.com rated the 2008 Malibu higher than the Camry.
While Consumer Reports still recommends many Toyota models, its critics find Toyota is using cheaper interior materials these days, said Jake Fisher, senior auto engineer with the Yonkers magazine.
Toyota's margins have also been hurt by a weaker dollar. Of the cars and SUVs the company sells in the U.S., about 30 percent are made in Japan, including 11 of 12 Lexus models and all Prius hybrids.
After years of a weak yen boosting profits, the Japanese currency has strengthened to 81 yen to the dollar from 112 at the end of 2007. Each 1 yen change versus the dollar equates to about 30 billion yen ($370 million) of effect on profit, Toyota said.
GM's China momentum
In China, the world's fastest-growing car market, Toyota has been slower to invest in factories and small, inexpensive cars.
GM arrived earlier and has won over consumers with high-end Buicks and cheaper Korean-engineered Chevrolet models, said Michael Dunne, president of Hong Kong-based Dunne & Co., which consults on the auto market in China and the rest of Asia.
"GM has the right products and very good momentum," Dunne said. The bankruptcy proceedings left GM with a strengthened balance sheet, and the carmaker has maintained market leadership in the U.S. and China.
GM earned $6.17 billion last year, the most since 1997, and CEO Dan Akerson is hurrying new models, pushing for more electric-drive cars, and investing in Brazil and China.
GM even gained share this year in profitable U.S. pickup sales. Its Chevrolet Silverado and GMC Sierra have increased deliveries in the first three months of the year by 30,418 -- more than the total number of Toyota Tundra pickups sold in those months. Toyota in 2007 approached its goal of selling 200,000 Tundras a year. In 2010, it sold 93,309.
GM gains in tight race
J.D. Power had predicted another tight race in 2011 after last year, when Toyota's sales of 8.42 million vehicles exceeded GM's by 30,000. Now GM is gaining, said J.D. Power's Schuster.
Toyota has lost production of about 500,000 vehicles since the March 11 earthquake and tsunami in Japan, said Javier Moreno, a spokesman. Full output won't return before November.
GM has also boosted U.S. deliveries through March this year by 69,000 more than Toyota.
"Given the turmoil Toyota is in right now, GM is poised to take the No. 1 spot," said Henner Lehne, global director of sales forecasting for research firm IHS Automotive. "In the near term, we have GM overtaking Toyota. It will be a battle over the next several years."
GM, which last month revealed a redesigned Chevrolet Malibu in Shanghai and New York, needs to keep growing in China to stay ahead of Toyota and Volkswagen AG, he said.
Volkswagen also aspires to lead global sales, Lehne said. "Volkswagen wants to be the next GM just like Toyota did," he said. "It's not about market share and it's not about size. It's about producing the right number of cars to get higher pricing and profitability."
VW has said it aims to surpass GM and Toyota with 10 million sales by 2018. Executives privately aim to meet the goal by 2015, a person with knowledge of the matter said in October.
VW last year reported the highest net margin among the five largest carmakers at 5.4 percent, according to Bloomberg data, and Ford Motor Co. posted a 5.1 percent margin.
GM was at 4.6 percent, while Toyota earned a 2.5 percent net margin in the calendar year. Toyota plans to report fiscal fourth-quarter profit May 11.
GM reports its first-quarter results May 5. "We're focused on running a profitable global enterprise," said Jim Cain, a GM spokesman. "So sales races aren't important to us."
GM and Volkswagen are also looking to win buyers from Toyota in segments such as family sedans.
GM will begin selling the new Malibu in January to take on the Camry, the top-selling car in the U.S. VW will open a factory in Chattanooga, Tennessee, this year to boost volume of the midsize Passat.
VW also slashed the base price of the Passat in the U.S. from $28,000 to around $20,000 to take on Camry and Honda Motor Co.'s Accord.
China may determine
The winner will be decided in China, the world's largest national market, said Dunne. GM and Volkswagen, whose joint ventures are the top sellers, have been introducing the more models for less than $10,000 that make up the fastest-growing segments.
GM, like Honda and Nissan Motor Co., is starting a China-only brand of low-cost vehicles called Baojun. GM and its Chinese joint venture partners will expand sales to 3.5 million by 2014 from 2.3 million last year, according to J.D. Power.
VW will build its China sales to 2.8 million from 1.9 million, while Toyota deliveries are expected to grow to 1.2 million from 857,000, the company said.
"Toyota has been more conservative and methodical," Dunne said. "Most of their growth has been where the Camry and larger Crown play. That's the slowest-growing segment."
Carmakers should be wary of the global sales title, said Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Michigan. GM boosted profit-eating incentives to keep its lead through 2007 and Toyota ran into quality problems after becoming No. 1, he said.