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For decades General Motors Corp. (NYSE: GM) has been losing marketshare as Toyota Motor Corp. (NYSE: TM) has been gaining it. It doesn't take a genius to realize that eventually the lines would cross. And that's what happened in the first quarter.

After decades as the world's leading automobile company, GM is now number two behind Toyota.

On a worldwide basis, Toyota made 2.367 million vehicles worldwide, while GM had expected to produce 2.335 million. In the U.S. market GM was still number one on the first quarter with 22%, Ford Motor Co. (NYSE: F) was second with 17% and Toyota's share was 16%.

As I first posted in January 2006, U.S. auto manufacturers are really finance companies that happen to sell cars. But GM is suffering from its subprime mortgage lending woes and Ford is on what appears to be a never ending downward cycle of cost cutting and market share decline.

Meanwhile, Toyota continues to grow. Its 2006 global production surged 10% to 9.018 million vehicles. The company produces cars with higher initial quality ratings than its peers', its prices are 14% higher and its costs per vehicle are $300 to $500 lower. In 2005, GM lost $2,300 on each vehicle it sold, while Toyota made $1,488.

Since I recommended Toyota on September 30, 2006 in my newsletter, the stock is up 15%. Trading at a forward P/E of 14.6, the company's earnings are forecast to grow 9% to $9.39 next year. While it may be a little pricey, it's not too late to buy it.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned in this post.

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