Competitive Connection

March 12, 2007

A Look at the Competition
Toyota’s U.S. growth
It all boils down to a simple bit of math: Toyota makes cars for less than it costs GM, and it gets to sell them at a higher price than GM does.

Toyota has built a rock-solid reputation for producing reliable cars. It achieved that by investing in bulletproof quality, advanced technology and high-mileage engines. It developed a super-efficient manufacturing method, known as the Toyota Production System, that relentlessly roots out waste and builds in quality. Every employee at Toyota (both Hourly and Salary) is expected to drive continuous improvement that delivers bottom line results, and they do.

Now Toyota is marshaling its most formidable asset: its phenomenal wealth. It's on track to make a record profit of $13 billion this year, most of that earned in the United States, where it now sells more cars than it does in Japan. As a result of its enormous profits, Toyota has $36 billion of cash on hand and a stock-market value of more than $200 billion. That's 12 times what GM shares are worth. And Toyota drives that money right back into its cars, outspending GM for the past two years. As a result, Toyota will replace 83 percent of its product line by the end of the decade— the most new models of any automaker, according to Merrill Lynch.–Source: Newsweek, March 12, 2007
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Then and Now
Cadillac reacts to customer concerns
It's one of those teeth-gnashing, rage-inducing experiences: Mere miles or months after your car's warranty expires, you find that it needs expensive engine repair. Car companies have for years kept goodwill funds for dealers to draw on in such situations. But until about a year ago, Cadillac had rigid rules that made dealers jump through hoops to get at those funds.
That put dealers at a disadvantage with archrival Lexus. Since Lexus has 221 dealerships to Cadillac's 1,400, each Lexus outlet is more profitable and can better afford to offer such perks as loaner cars and repairs for vehicles that recently went off warranty. So last year Cadillac decided to loosen up the rules, giving dealers the power to decide how to respond to customers with repair needs outside of warranty.
"Luxury customers are used to staying in five-star hotels and having secretarial staff take care of everything. They expect dealers to take care of them, and we have to give dealers leeway to do that," said Jim Taylor, Cadillac’s general manager.
GM research shows that customers who get good service are five times more likely to buy another car from the same brand than those who have had a bad experience.  –Source: Business Week, March 5, 2007
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Then and Now
Competition has grown in the U.S.


Year

Number of Makes

Number of Models

Big 3
Market Share

1965

33

96

90%

1975

42

185

81%

1985

54

245

73%

1995

61

287

72%

2003

60

322

63%

2006

61

340

56.5% *

*Data is Calendar Year to Date through September 2006
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Then and Now
GM’s new approach to design & engineering
General Motors Corp. is about to undergo what analysts say could be a save-the-company move for an automaker besieged by foreign competition.

Instead of duplicating expensive design and engineering costs by developing similar vehicles in each of its divisions around the world, GM is greatly simplifying the way it develops cars and trucks worldwide. It's consolidating its automaking operations into four regions of the world, each responsible for engineering a different type of vehicle.

"GM has been an international company for nearly 100 years, but it's never acted like one,'' said Ron Harbour, president of Harbour and Associates, a Troy-based automotive consulting firm. "This is GM's version of tearing down the Berlin Wall.''

Harbour and others say GM could save billions of dollars by using common platforms - many of the parts beneath the sheet metal - that consumers don't see or care about.

Analysts say GM's new product development system is similar to that of successful Japanese automakers. Honda Motor Co.'s popular Accord model, for instance, is engineered in Japan, but features different styling in the various countries where it is sold. –Source: Ann Arbor News, March 4, 2007