Toyota set to overtake GM as top automaker

updated 8:43 a.m. ET Dec. 22, 2006

NAGOYA, Japan - Toyota announced on Friday a global production target of 9.42 million vehicles for next year, increasing the odds that the Japanese manufacturer will surpass troubled General Motors Corp. as the world's No. 1 automaker.

The latest figure, announced by Toyota in a release, marks a 4 percent increase over the 9.04 million vehicles the company expects to produce this year and easily clears the 9.2 million vehicles GM is estimated to have produced this year.

GM does not give targets for next year, but it has been forced to scale back production recently, seeing its market share eroded by Asian automakers, including Toyota, which have a reputation for better mileage.

The numbers weren't a surprise, given the recent achievements of Toyota, said Tsuyoshi Mochimaru, auto analyst with Deutsche Securities in Tokyo.

"The growth highlights the fantastic reputation Toyota has won for its cars," he said. "Toyota may need to set the next goal to keep its motivation up if it becomes No. 1."

Although Detroit-based GM says the perception that its cars are gas-guzzlers is unfair and inaccurate, it is undergoing massive restructuring after racking up more than $10.6 billion in red ink last year and $3 billion more the first nine months of this year.

Toyota, on the other hand, is on a roll, reporting record profits, churning out best-sellers like the Camry and Corolla as well as carving out a reputation in hybrids, which use a fine-tuned technology of switching between a gasoline engine and electric motor to save gas at a time when oil prices are rising.

Toyota, which passed up Ford Motor Co. as the world's No. 2 automaker in 2003, also painted a bright picture of sales in 2007. It is expecting to sell 9.34 million vehicles globally next year, up from 6 percent from 8.8 million expected for this year.

The bullish outlook lifted Toyota's stock to an all-time closing high of 7,800 yen (US$66.10) in Tokyo.

But Toyota President Katsuaki Watanabe barely said anything when asked about the possibility that his company may soon beat GM in global output.

"That's just what the results may be," he said quietly at a news conference at a hotel in Nagoya, central Japan, near Toyota city where the automaker is based.

Watanabe spent far more time talking about how Toyota must strengthen quality controls if it hoped to continue growing.

Toyota has been plagued with a rising number of recalls as it standardizes parts to cut costs and develops and sells more vehicles at a faster pace. Its challenge is to maintain its reputation for quality cars and customer satisfaction at the same time that it continues to rev up production.

"There will be no growth without quality," Watanabe said, adding that quality will be closely monitored at all levels of production, including design, development and procurement. "We'd like to continue our efforts to make good products that win support from our customers."

Although Toyota's production methods, which empowers assembly line workers and trims inventory, are praised by experts, transporting that production to new places remains a challenge.

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