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Toyota set to overtake GM in 2007

Automotive

Toyota Motor Corp. expects to produce a record 9.42 million vehicles next year, a 4% rise that should take it past General Motors Corp. as the world's biggest auto maker.

As the Japanese firm woos buyers worldwide with cars seen as safe, affordable and fuel efficient, US rivals GM and Ford Motor Co. battle falling market share, closing factories and shedding thousands of jobs. Soaring fuel prices have battered Detroit's auto heartland, with customers shunning gas-guzzling pickups in favor of cheaper-to-run models from Japanese and South Korean car makers. Asked about the possibility of passing GM in 2007, Toyota's 70th anniversary, company president Katsuaki Watanabe said, „That would merely be a result, not a goal. „The important thing is to be a leader in car-making, and that's done by improving products,” he told a year-end news conference, adding that vehicle quality will be Toyota's top priority at a time of rising vehicle recalls. Through hit products like the Camry, Yaris and Prius hybrid cars, Toyota has overtaken Chrysler Group in the United States and is expected to pass Ford next year, market forecaster Edmunds.com says.

Ford has said it expects its US market share to slip to around 14 to 15% in 2007, from 16.6% in the first 11 months of this year. Toyota had 15.3% in the same period. The Toyota group, which includes minivehicle maker Daihatsu Motor Co. and truck maker Hino Motors Ltd. forecast 2007 global group sales of 9.34 million vehicles, up from an estimated 8.8 million this year. GM does not provide sales or production forecasts on an annual basis, but adding GM's January-September global sales to its Q4 production plans puts its 2006 volume at 9.168 million vehicles. At the parent level alone - Toyota, Lexus and Scion - Toyota expects to boost 2007 output by 4% to 8.47 million cars, with new capacity in Russia, China and the United States, among others, and sales by 6% to 8.4 million units. „Toyota is securing a solid earnings base as its production methods are deployed worldwide and global demand shifts to fuel-efficient vehicles,” Goldman Sachs auto analyst Kunihiko Shiohara wrote in a recent report. „Its annual vehicle production is likely to increase about 500,000 a year for the next few years and we expect operating profit growth of about 10% for the next three years.” In the year to March, Toyota expects to earn a net profit of ¥1.55 trillion ($13.1 billion) a record for any Japanese company. Toyota shares have gained 27% this year, valuing the firm at close to $230 billion - about 14 times GM's market capitalization. The stock ended Friday up 1.6% at a record close of ¥7,800.

To keep profits growing in tandem with sales, Toyota is continually looking to cut costs, such as merging more car components. What it saves in costs, it hopes, will give it more to spend on developing new cutting-edge technologies. Through aggressive marketing and better product, Toyota aims to boost sales of its premium Lexus cars to balance out margins with increasingly popular compact cars. Elsewhere, Toyota last month formed an equity tie-up with truck maker Isuzu Motors Ltd. in a bid to catch up in clean diesels, a rival technology to its signature hybrid system. Last year it took a stake in Fuji Heavy Industries Ltd., partly as a way to quickly add production capacity in North America. One gap Toyota has yet to fill is the development of ultra-cheap cars, such as Renault SA's no-frills, €5,000 ($6,600) Logan, to compete in emerging markets such as India. Watanabe repeated that was a top priority to ensure future growth, especially as mature markets in North America, Europe and Japan see sputtering demand. He said his engineers were making progress. „This is something all auto makers need to think about, not just Toyota,” said UBS Securities analyst Tatsuo Yoshida. „Toyota is basically powerless in India now. If they build a car like the Logan, it would be frightening for the rest.” Executives are aware that becoming global leader brings its own headaches. „At the top, the scrutiny and criticisms are on a different level,” one said. „That's something we need to be mindful of, and figure out how to deal with.” (Reuters)

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