Tuesday, April 24, 2007

Toyota: The Rising Sun Continues

Japan is known as the "land of the rising sun" and its chief auto maker, Toyota, continues its towering rise. This morning I was watching the Today Show and it was announced that the car maker has surpassed GM as the largest automobile producer in the world this past quarter. This is something that everyone in business and politics has been expecting for years. That time has come.

A half a century ago, there were a "Big Three" -- GM, Ford, and Chrysler -- that dominated the marketplace and no one imagined Toyota (or any other foreign auto maker) eclipsing any of them. Admittedly it is only one quarter, GM is still number one over all, but the slide for US car builders is expected to continue.

Why the decline of US auto makers? The cause is multi-fold:

* US auto makers are not nearly as nimble as their Japanese competitors. They are typically behind the curve and limping behind Japan when it comes to change.

* Japan has taken a surprisingly safe approach to auto making that gives the consumer assurances of the quality of product. It sounds "boring", but Japan's predictability in style and substance (e.g., engineering) has made it the up and coming "king of the road."

* The devastating impact of Big Labor. Unions have hampered these companies with salary and benefit packages that make it impossible for US companies to successfully compete. This is likely the number one reason.

The above are just a few examples, but Japan will continue to torment US auto makers and I expect its prominence to becomes permanent. That is destined to happen if the US doesn't do the things necessary to be competitive.

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