Summary
Last week, the president of the world's largest automaker, no, not GM, Toyota, said at a news conference that his company was "gasping for salvation." and is in the grip of a long-term decline.
Analysis
The global recession has hammered sales and profitability with Toyota losing $8.4 billion in the fiscal year that ended in March. Sales are likely to be down 18% more this year, with a turnaround next year looking modest at best.
That weak performance isn't surprising to anyone who has followed the woes of the U.S. auto industry. But here's something that is surprising: Toyota's CEO Akio Toyoda said at a recent news conference that his company is "gasping for salvation" and is in the grip of a long-term decline. "Toyota has become too big and distant from its customers." Then he apologized for losing money and letting down the motoring public.
U.S. car buyers have believed for a long time that their domestic auto makers, especially the recently bankrupt Chrysler and General Motors, got too big and lost touch with their customers. But Toyota? Its products consistently rank near the top in quality and reliability. Sales are down roughly 29% so far this year, but that's about the same as the industry average; GM and Chrysler are down more, and BMW nearly as much.
But Toyota is far more contrite than its rivals. Public apologies are traditional in Japan when a company loses its way, and for Toyota, losing money in the Detroit tradition is a dramatic comedown. Besides, Toyota is very likely to get its act together, return to profitability, and continue its ascent. Projections show Toyota gaining U.S. market share over the next several years and battling GM and Ford to be the top seller of cars.
Apologizing for missteps helps explain Toyota's success-and Detroit's decline. It's hard to imagine an American CEO apologizing for anything, and GM, Toyota's biggest rival, has done the opposite for years, hyping even the lamest products. GM has received about $51 billion in taxpayer aid, and it's unlikely that the company will be able to repay it. Yet there have been no apologies for the destruction of shareholder wealth or the dependence on public handouts. Sure, apologies are no substitute for a sound business strategy, but humility at least shows you're aware of the problem and taking responsibility for it.
Besides the apology, what else has Toyota done? Their shape-up plan includes a huge advertising blitz, more product, improved quality, better styling and fixes for Lexus and Scion.
GM, by contrast has been jaunty since its quick emergence from bankruptcy. There was a big flourish when the company rolled out its program to sell cars on eBay., an effort that ended quietly with no significant sales. GM is touting the forthcoming Chevy Volt as a wundercar, yet there are questions about cost, practicality and reliability.
Less bravado on the part of GM, and even some paranoia, might work better.
Jack Sayer consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
