A Photo Finish: Toyota Tops GM As World's Largest Car Company

GM (NYSE: GM) is supposed to be a badly crippled giant. Toyota (NYSE: TM) is the global car company with the most efficient manufacturing plants, the highest quality cars and the strongest balance sheet. All of that was turned on its head because Toyota recalled more than 9 million vehicles last year. That helped drive the Japanese car firm’s US market share from over 18% in 2009 to barely above 15% last year.

Global sales data from 2010 show Toyota barely kept the spot as the No.1 car and light vehicle company in the world. It has held the position for three straight years after seizing it from a faltering GM. Toyota said its sales last year were up 8% to 8.42 million. GM sales worldwide were higher by 12% to 4.39 million.

Analysts pointed out that Toyota’s Achilles’ Heel was the market in China as much as the US. GM and VW are the share leaders in the market which surpassed the U.S. as the world’s largest two years ago.  GM’s market share dropped in the US in 2010. China was the company’s salvation particularly as it went to the market with its IPO.

The GM competition with Toyota may not be what determines which has the top spot in a few years. Several smaller car firms will probably take so much market share that the No.1 spot will lose much of its luster. VW says it plans to be the top car maker worldwide by 2020. That will be impossible if it cannot increase its American sales at least ten-fold. Ford (NYSE: F) may be the world’s most well-run large car company now. Its new line of cars has done extremely well. Hyundai has shown a remarkable rise in sales in the last two years, especially in the US market. It is likely to continue to take market share from most of its competition. Hyundai has taken Toyota’s place as the high quality low-cost manufactures.

Taking hold of the top spot among car manufacturers is an empty success unless it carries substantial profitability. GM and Toyota have each had sharp drops in margins recently. They might be better to trade the lead for higher profitability.

Douglas A. McIntyre