This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and watch out for more Battle of the Brands posts.
The sad part about this subject is watching these two companies going in almost opposite directions -- at least for now. General Motors General Motors Corp. (NYSE: GM) has a current market capitalization of $18 billion versus the behemoth Toyota Motor Corp. (NYSE: TM) with a massive market capitalization of $236 billion, over 13 times bigger than GM. Yet on the surface one would never guess these numbers as their revenues are fairly close in comparison: GM for 2007, estimates revenues of $173 billion, and Toyota's at $200 billion.
It's what's underneath the hood that distinguishes these companies.
Toyota has just come off a five-year period of growth in its per-share earnings at 26% per year, an astounding accomplishment for such a large company. General Motors has experienced flat to negative earnings per share growth over the same five-year period. Toyota is opening new plants, both in Japan and the U.S., to handle demand, while General Motors is closing plants to save costs and resources.
Toyota has set itself apart as the undisputed world leader with the hybrid auto: half combustible engine, half battery powered. The hybrids are still at a price premium to comparable standard combustible, gasoline-powered models, but they will close that gap over the next two or three years. The hybrids come in luxurious lines of the Camry, the Highlander SUV, and the Lexus RX series, as well as the economical Prius model. GM has yet to enter the hybrid field in a serious way.
The General Motors mantra for 2007/2008 is survive at all costs. Closing plants and dealing with the unions over health-care benefits is the first order of business for GM. The long-term health-care benefits provided to the retirees costs in the billions of dollars per year. GM literally has to downsize itself first before growing the company again.
Toyota on the other hand is on a growth curve, looking at 10% top line and bottom line for the next couple of years, and as the hybrid offerings become more and more mainstream, Toyota's positioning will only get stronger. Toyota appears to be taking over the mantle as the world's largest auto manufacturer from GM. General Motors will serve its employees, shareholders, and customers best by becoming a lean, mean machine.
Toyota has the hot hand and appears poised to keep that going. The biggest factor for Toyota has been acceptance by the American consumer and the success of its anchor-model, the Camry, which is now among the top three cars sold in the United States. The Lexus luxury line of autos and SUVs redefined the model for superior customer service. Toyota realized early on that serving and appreciating the customer -- and letting the customer know that -- would win them a strong loyal base. Toyota does not publish these facts, but many dealers will say that 70 to 75% of Lexus buyers are repeat buyers. That is loyalty!
GM and Toyota were once very comparable in almost all statistics. The pendulum has definitely swung for Toyota and appears it will stay that way for a long, long time.
But is GM down and out for good? What do you think?
Georges Yared is the chief investment officer of Yared Investment Research. For more information, see www.georgesyared.com.
Be sure to vote in our poll for Toyota or GM as your preferred brand, and let us know why you love it in the comments. Results of all Battle of the Brands match-ups coming soon.
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Reader Comments (Page 2 of 2)
4-22-2007 @ 11:31PM
Evan said...
If you fly the American flag, then buy an American car.
4-23-2007 @ 2:09AM
quinn said...
i have been working as a valet for 2 years now driving hundreds of cars every weekend. i can tell you that gm's quality does not compare to toyota. 5 year and older gm's squeak, rattle, have electrical problems, and feel like they're about to break down. even the cadillacs. the $15k cavalier has the same electronics/switches as the $50k cadillac. i can drive a 10 yr. old camry or lexus with 150k miles and it still runs strong, everything works properly and it feels no where near its age. unless you drive a wide variety of cars owned by a wide variety of ppl. you can't say GM's cars are good quality! i will admit quality is getting better but still not as good as ford and both still have a long way to go! get out there and drive them like i do and get back to me. im sure you'll get the same results!
4-26-2007 @ 4:45PM
dsmith2319 said...
Toyota has also taken the lead in recalls but we hear nothing about it in the press. Never any bad news for imports.
4-24-2007 @ 1:51PM
Caryn said...
I'm glad to see Toyota is up in the rankings. Sad to see that Ford is too. I owned a Ford product for 7 years and they turned their back on me and could care less about customer service! See my story posted at: http://blog.vehiclevoice.com/auto_news_reviews/what_were_they_thinking/
The Ford Motor Company is killing the American dream. It's time for them to be shut down and pulled off the top sellers list! People need to realize that American made cars are not really American made anymore. Hence all the problems! i.e. Only 1% of Pontiac parts are made in the USA. Crazy huh? So-called foreign cars are starting to be made more and more in the USA. i.e. Hyundai just built a huge plant in Alabama.
4-25-2007 @ 8:44PM
Michel said...
paulv that is a lie. According to snopes, "Their page about Toyota's Contributions to the Relief Effort details a $1 million donation to the American Red Cross and a program to match similar employee contributions." http://www.snopes.com/rumors/cars.htm Just because they don't brag about it doesnt mean they dont donate.
4-24-2007 @ 10:38PM
Ryan said...
GM is the worst car company. The reason that GM is in a slump and Toyota is forging ahead is GM itself. They sell the same crap in all their vehicles year after year. They never improve their cars unless the market forces them to. Name one GM innovation. Airbags? Germans. ABS? Germans. Variable Valve Timing? Germans. The Germans have been creating new technology for years but the reliability and low cost of ownership was not always there. The Japanese copied all these innovations and married them with reliability and in most cases, very low operating costs. I have an Acura Integra with 400,000 kms. That car is still running well. That car has suffered (and still does suffer)many Canadian winters. How many 1990, 4 cylinder cars from GM are running with that mileage with everything working. I mean everything. The sunroof, the AC, the power windows, etc..... That car starts in minus 30 degree Celcius without the block heater. It is funny, I can afford a better car but if I scan my options, what could be better? The operating costs after all these years and miles are fuel, insurance and oil changes... GM Sucks and deserves to fall.
4-26-2007 @ 9:25PM
paulv said...
Michel, I stand corrected in regards to the contributions comment with the caveat that snopes did state that they did not verify the veracity of the claims made by the various car companies. I take exception to the accusation that I lied. For all facts in my comments, I had first hand knowledge or published facts by the companies. I unfortunately did not validate the source data for the contributions.
6-03-2007 @ 8:19PM
R. Dean said...
“Oh, anyone remember Pearl Harbor?”
2117 solders died at Pearl Harbor…then two atomic bombs killed 140,000 Japanese.
WTC 3,000 died, but you'll buy domestic gas-guzzlers, even though oil profits directly support countries involved.
WW II 300,000 American solders died fighting against Germany, but you'll support DaimlerChrysler.
Countless slaves and Native Americans murdered in America’s history, but I guess that’s easy to forget, right?
7-07-2007 @ 11:55PM
MaxMoose said...
Bottom line. Looks. These foreign cars just look cooler. As far as Toyota trying to be an American company, it's true. Why aren't they building plants in Mexico? Like....GM has. My Uncle Some years ago was proud of his American made Chevy Tahoe and was appalled when I pointed out it was made in Mexico. Oh,oh...loyalty to American products? Not any more. Attention! Steel workers, Toyota uses American steel in there vehicles made in Indiana. Honda's trying to be an American company too. Building plants here in the USA! I understand legacy cost, but what are you saying? GM can't kick out all the old guys and hire somebody that can design a car that doesn't look like an Edsel. How about that Pontiac Grand Prix? Same car for 11 years. I could go on and on, but I won't. Your welcome.
8-21-2007 @ 5:12PM
realist0000 said...
Let's see.... "Countless Years of Horrible Vehicles by GM vs. A Few Years Of Recalls by Toyota??"... I say GM should've RECALLED their whole line up back then.. but they chose NOT to because they didn't care about the Impala, nor did they care about the Cavalier, Lumina, Catera,... but continued to dump a bunch of crap on the market just to make some money... The whole 5 year/100,000 mile warranty came in as a desperate marketing ploy... Now, all they do is EMPLOY a bunch of knuckle-heads to come up here and use the MEDIA (eg.. Forums,Blogs,Free Sites) to bash their Japanese competitor.. It doesn't just take 3 years to make a come back... It took the Japanese years, and now it's the American's turn... This whole USA, USA, USA ploy is over rated and the fact that their vehicles are being built in Mexico and Canada takes all credibility away from the American's that helped pioneer them to where they are at today.. SHAME ON THEM!.. BTW.. I'm happy to see that the RECALLS by Toyota only show's that they're taking responsibility for their products... instead of how GM brushed off all the crap they dumped on the market.. I'm glad to see that they're finally get what they had coming a long time ago.. And I don't even wanna hear about the "Profits going back to Japan".. what about the money that's used to run the factories and pay the workers in Mexico and Canada.. Where is that Money going???
9-26-2007 @ 10:35AM
geoff said...
UAW and American auto manufacturers artificially supported huge wage and benefits packages for their workers. Sadly, these expenses are now unsupportable. Toyota and other foreign manufacturers locate in the SE of USA where labor is cheaper, train their workers, build more effecient plants (because they have the capital and capability to do so) and build high quality cars. American auto manufacturers are held hostage to high cost locations and aging plants. They must give billions in concessions so they can close inefficient plants and lines. Granted US auto bears the blame for poor design, and allowing poor quality --arguing that it's cheaper to pay for a recall than build it right. They may have gotten better in the last couple of years, but people's memories are long. I haven't owned a US auto car in over 15 years and won't start now.