GM And Toyota. A Tale Of Two Losers

General Motors hasn’t made money on its core auto business since 2004 – and did nothing. Same cars, same talk, same mismanagement. GM is in the government’s intensive care, hangs on a the tax payer’s money drip, and still hasn’t changed.

Contrast that to Toyota. Toyota will announce its first operating loss in its history – approx $1.6b, less than GM’s monthly cash burn – and Toyota went to battle stations months before the announcement.

Toyota does everything GM failed to do. They changed the management. Akio Toyoda, grandson of the founder, will take over as president. Even before he’s officially taking the job, Toyota “appears ready to overhaul its entire operations, from development to production to its sales network,” the Nikkei (sub) reports. Nothing is sacred. Plants are idled worldwide. Output is slashed. A few days ago, the company held a meeting in Nagoya that was attended by 1,000 representatives from Toyota dealerships across the country. Toyoda made it clear that he would not hesitate to drastically revise the firm’s domestic sales structure. And that’s just the beginning. More drastic moves are afoot.

Toyoda has created a team of employees charged with devising new corporate visions, including making decisions on future domestic and overseas lineups, production system and sales networks.

While GM is painting rosy pictures about pent-up demand and sales which will soon rebound, Toyota is preparing for the worst.

Total global output capacity for all carmakers is 100m units a year. Actual demand is estimated at about 60 million cars worldwide. According to industry figures, capacity utilization below 80 percent spells trouble. With capacity utilization of 60 percent (and falling) the world’s auto industry is in deep trouble. Again, Toyota alone has excess capacity of more than a million units.

While GM was betting on SUVs and available credit, Toyota aims to take the lead in the industry by introducing not only the most environmentally friendly cars but also budget vehicles for emerging countries and (yes) slick models that can spark young people’s interest in cars.

While GM was fleecing its suppliers and even drove its own Delphi into bankruptcy, Toyota is worried about the health of its suppliers. Toyota has conducted an emergency poll of around 50 parts suppliers, to grasp their fundraising situations. The upshot is that their financial health is rapidly worsening. “We will possibly need to help them secure necessary funds,” said Senior Managing Director Atsushi Niimi, who is in charge of procurement.

While GM coddled the UAW, Toyota slashed most temporary workers, and may let unionized workers go also.

Toyota officially replaced General Motors Corp. as the world’s No. 1 automaker in 2008. At Toyota, this is already regarded as an embarrassing non-event. Everybody knows that the reason is GM’s poor performance, rather than Toyota’s strong results. There were no celebrations at Toyota. Actually, it is an irritation. As the Nikkei says: “Staff are simply left without a new goal to shoot for and a bit weary from frequent changes in production schedules. To raise the morale of its people and suppliers, Toyota needs a new goal other than just “growing bigger” or “becoming No. 1.”