The folks in Detroit may be pleased to see Toyota Motor Corp. (NYSE: TM) cutting its sales forecasts, but the pleasure is sure to be short lived. Despite its more modest outlook, Toyota leads General Motors (NYSE: GM) in global vehicle sales -- and its lead is only getting bigger.

According to a report on Reuters, GM sold 4.54 million vehicles worldwide in the first two quarters of 2008. This represents a 3% drop from the same period last year. Although sales in Europe, Latin America and Asia actually rose, the General couldn't overcome a whopping 15% decline in North America.

Toyota, on the other hand, saw a 2.2% increase in global sales, to 4.8 million units. This gives Toyota a lead in the range of a quarter million vehicles or more. And with its global sales growing, the lead is likely to widen, especially as Toyota switches over to producing more efficient cars in North America and fewer of the wasteful trucks that Americans loved so much until just a few weeks ago.

As Autoblog points out, the sales crown is important to both companies, although neither will admit it publicly. GM was the global sales king for 77 years, and the loss of that title will certainly hurt. Last year, the sales race ended essentially in a tie. But with these results, it looks like Toyota will be the champ in 2008 and, in all likelihood, beyond.

The executives at Toyota Motor Corp. (NYSE: TM) must live in a world all their own. They have maintained the forecast for their worldwide vehicle sales in the face of a massive downturn in the US auto market and weakness in Japan and parts of Europe.

The big Japanese car company finally bowed to reality and cut its prediction for units sales, but not by much. According to MarketWatch, "The automaker forecast sales for the full year in the lower 9.5 million unit range, down from the previously targeted goal of 9.85 million cars and trucks."

While the revision is a defeat for Toyota, it is also an odd acknowledgment of how well its does with car sales around the world and how clever it has been in designing and marketing new cars. In the US, where most auto firms are dying, Toyota has had a smashing success with its Prius hybrid. It cannot make enough of the cars to keep up with demand.

To no one's surprise, Ford (NYSE: F) will detail its plans to dive into the small car market when it announces earnings on Thursday. It is a lot late to get religion.

According to The New York Times, "as part of the huge bet it is placing on the future direction of the troubled American auto industry, Ford will realign factories to manufacture more fuel-efficient engines." The bet is a smart one, but it may not matter.

Ford is now close to a decade behind the curve. Companies such as Toyota (NYSE: TM) have produced small cars for the US market since the days they began to open dealerships in America as Ford chased immediate profits in pick-ups and SUVs. The margins in these products were outstanding, but their success relied on gas staying at $2 a gallon forever. Things did not work out that way.

Ford will now go through a process of more cost cutting, firings, and expensive retooling of its plants. To make all of this work, the car company will have to borrow money or sell more stock. In either case, current shareholders are likely to be diluted.

Ford has been so slow to move into the market for fuel-efficient vehicles that it may have trouble staying solvent if the US car market stays very soft for the next two years.

That means Ford's future as an independent company could be in jeopardy.

Douglas A. McIntyre is an editor at 247wallst.com.

Although Ford Motor Co. (NYSE: F) has fallen on hard times -- like much of the auto industry -- the company will eventually come back around. Its success, like that of competitor General Motors Corp. (NYSE: GM), will be on its ability to be flexible enough to build the vehicles customers want as needs change.

That's a large order, though. Ford CEO Alan Mulally recently stated that his Way Forward plan was behind schedule, and the automaker wasn't expected to post an annual profit until 2010. Ford knows it needs to be more globally flexible or it won't even make that extended target. Profit centers like SUVs are so 1999.

On top of all that, a Volkswagen (OTC: VLKAY) executive recently said that the German automaker intends to surpass Ford to become the third-largest seller of vehicles in the world. That's quite a bold prediction and it puts Ford under even more pressure to get automobiles delivered to customers with increasing manufacturing and selling flexibility. As of last year, Volkswagen sold 6.19 million vehicles to Ford's 8.55 million. Is one year enough of a background to declare VW a future winner over Ford? Possibly.

Then again, Japanese automakers Honda Motor Corp. (NYSE: HMC) and Nissan Motor Co. (NASDAQ: NSANY) are not going anywhere and will continue to put up a great fight. Toyota Motor Co. (NYSE: TM) is currently the king of the Japanese automakers, right behind GM globally. If Volkswagen really believes it can charge into the third spot, it better have the global vehicle finesse to know what its regions' customers want before they want it -- and then, make those sales.

It may be too late for Ford (NYSE: F) to get back some of its market share in the U.S. It may have waited too long to offer a wide variety of small cars with good gas mileage.

But, the company refuses to give up the ghost, at least for now. According to The Wall Street Journal, Ford "is preparing plans to retool some U.S. plants to produce small passenger cars that the company has been making and selling mainly in Europe."

By using products that are already fully developed, Ford will cut its time to market with cars designed for an environment with high gas prices.

Making the plant changes necessary to manufacture the car will take over a year-and-a-half. Because the new product is not a hybrid, it does not help Ford offer direct competition to the best cars from Toyota (NYSE: TM).

Ford has a band-aide, but it will not work on a wound that is gushing blood.

Douglas A. McIntyre is an editor at 247wallst.com.

We have heard a lot of news over the past 12 months about soaring fuel prices and the effect it is having on the major automakers. With record-high oil prices, and gasoline running about $4.10 a gallon, drivers are spending more and more money to fill up their tanks. One of the natural options for people has been to move towards less expensive, small, and simple cars.

General Motors Corp. (NYSE: GM) noticed that fuel-efficient vehicles will be more appealing to consumers, and announced last week plans to reduce production at its truck division (a bit late to join the party, but at least it's something for the struggling auto maker). Toyota Motor Corp. (NYSE: TM) is also slashing truck production during three months at its U.S. plants.

While It is true that most less expensive cars don't offer the same luxury when compared to sedans or SUVs, they come with a lot of options that can satisfy every individual need. Among the cheapest cars available, the article points out Honda's Fit ranked No. 11 at $13,950, a small car whose standard version comes with an adjustable steering column and four-speaker audio system, and is equipped with multiple airbags in the front, rear and side. Other vehicles that follow the same logic are the Chevrolet Aveo, ranked No. 2 at $11,460; the Toyota Yaris, third at $11,550, and the Kia Spectra, fifth at $12,895.

Markets in Europe and Asia sold off sharply.

The Nikkei fell 2% to 12,755. Toyota (NYSE: TM) was off 2.5% to 4680 yen.

The Hang Seng sold off 3.9% to 21,157. China Life (NYSE: LFC) dropped 6.1% to 26.75 yuan. The Shanghai Composite was down 3.4% to 2,779.

In London, the FTSE dropped 1.4% to 5,225. Barclays (NYSE: BCS) was down 3.7% to 259.75 pence. In Germany, the DAXX was off 1.8% to 6,086.

Data from Reuters.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Toyota Motor Corp. (NYSE: TM), responding to U.S. demand for its Prius hybrid vehicle, will begin making the small sedan in the U.S. The decision comes on the back of a weak U.S. dollar -- which makes exports more expensive -- and also reflects the fact that the U.S. is the biggest market for the 45 MPG vehicle.

It will take until 2010 for the Prius to be built in U.S. factories owned by Toyota. In a strange twist of irony, the Mississippi plant that will build the Prius was slated to make Highlander SUVs. Except for the hybrid version of that midsize SUV, consumers continue to shun almost anything with a V6 or larger in the face of "not-going-anywhere" $5/gallon gasoline.

With the U.S. making up over 60% of global demand for the Prius, Toyota has a winner here -- but it needs to spread the wealth into other passenger vehicle products as well. If Toyota can get its hybrid technology affordable in such staples as the Camry and Highlander, it will have a winning place in U.S. sales, even more than it commands now. The Prius is a great first step -- but more need to come. Consumers are mad about gas prices and fickle about which future cars they'll drive -- play to them.

MAJOR PAPERS:

• The Wall Street Journal reported that Toyota Motor Corporation (NYSE: TM) is set to revamp its manufacturing operations in the U.S. in response to rising gasoline prices that have led to a shift toward fuel-efficient models. Officials at the auto maker said key moves may include dropping plans to produce the Highlander car-SUV crossover vehicles in a Tupelo, Mississippi plant, instead producing the Prius at the plant.
• Tomorrow Apple Inc (NASDAQ: AAPL) is set to launch its second version of the iPhone but it also will be opening its APP Store to software developers--an online bazaar--with the intent of bringing more applications to the phone as it has with music via its iTunes stores. Apple's goal is to turn the iPhone into a gadget that more resembles a personal computer, the Wall Street Journal reported.

OTHER PAPERS:

• According to sources, the South China Morning Post reported that Wynn Resorts Limited (NASDAQ: WYNN) is considering a secondary listing in Hong Kong that would raise as much as $3B. The source said that the fund-raising plan has yet to be approved that that the company is a "long way" from a share sale and "might never do it."

WEB SITES:

• In an interview, Bloomberg reported that Former St. Louis Federal Reserve President William Poole said there is an increasing chance the U.S. may need to bail out "insolvent" Federal National Mortgage Association (NYSE: FNM), or Fannie Mae, and Federal Home Loan Mortgage Corporation (NYSE: FRE), or Freddie Mac. Poole said data provided show that the fair value of Fannie Mae's assets fell 66% to $12.2B in Q2, while Freddie Mac owed $5.2B more than its assets were worth during the quarter.

Toyota Motor Co.'s (NYSE: TM) Prius hybrid is by far the world's most successful hybrid vehicles, with sales numbering over one million units. In addition to the great gas mileage these gas/electric vehicles provide, could these cars become even more efficient? According to Toyota, that's already in the works.

The Japanese automaker was featured in Japan's Nikkei newspaper yesterday as saying it will begin installing rooftop solar panels on its next-generation Prius vehicles. Starting with the high-end model, these solar panels will be used to power the air conditioning systems of the car. According to the Nikkei report, these solar panel arrangements may start showing up as next spring.

If Toyota can pull this off, it will mark yet another milestone in automotive history: including solar panel technology in a mass-produced car. It could also set off a trend to power automotive subsystems directly from solar power instead of internally generated power from the gas engine/alternator system or the onboard electric motor. Solar power is abundant and free -- why not use it as much as possible?

Now, where are the other automakers with this? General Motors (NYSE: GM)? Ford Motor (NYSE: F)? A show of hands, please.

I was actually in Detroit on Monday. I'm not going to write about the urban decay and the deterioration of the city. Many have researched and documented this far better than I ever could. But even in my short three-hour visit, the evidence was all too clear. Personally, I think Detroit has more character than many other richer and far more maintained and manicured cities. Even abandoned and in shambles, many of the buildings are architectural gems. Perhaps because one can still see the glorious past through the ruins, that it is so affecting. Or, as the website names them, they are The Fabulous Ruins of Detroit.

It is for this reason that the recent talk of bankruptcy for one of the Big Three has been so disturbing.

This week has been very busy for automakers, starting with June car and truck sales reported on Tuesday. General Motors Corporation (NYSE: GM) reported an 18.2% drop in sales, which was actually better than expected, and Ford Motor Company (NYSE: F) a drop of 27.9%. Meanwhile, Japan's Toyota Motor Corporation (NYSE: TM) posted a 21.4% sales decline. GM shares actually got a boost from the sales figures, but that didn't last long.

This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.

This may be perhaps the most surprising article in this series as few investors realize how huge Toyota Motors (NYSE: TM) is, especially when compared to Ford Motors (NYSE: F). Toyota sports a stock market valuation of $168 billion, 12 times the size of Ford's market cap of $13 billion. In fact, an even more surprising statistic: Toyota is 8 times larger than Ford and General Motors (NYSE: GM) combined!

Toyota has recently surpassed GM in annual unit sales of cars and trucks. Toyota sold over 9.3 million units in 2007 and has 16% market share in the United States. In spite of the difficult environment that all auto makers are facing with the economic slowdown, Toyota is poised for future growth with its cutting-edge line-up of hybrid autos and trucks. But, not too far behind Toyota is Ford. The company has perhaps a much brighter future than its main U.S. competitor GM. Ford has taken the necessary steps these past 21 months under the leadership of CEO Alan Mullaly. He was the president and CEO of Boeing's (NYSE: BA) commercial plane division.

Mullaly brings experience to Ford, but more importantly, he has a fresh approach and ideas from the aerospace industry. He has quickly retooled Ford by closing unproductive plants and expanding manufacturing in expense-friendly nations such as Mexico. Mullaly embraced hybrid technology and has positioned Ford as the American hybrid alternative to Toyota.

Before the bell: Futures drift lower as oil sets another record high

Since Apple Inc (NASDAQ: AAPL) is no longer insisting on revenue sharing from mobile operators selling its iPhone, China Mobile Ltd (NYSE: CHL) said this cleared the biggest hurdle in bringing the iPhone to mainland China. They just have to resolve some practical issues now.

KB Home (NYSE: KBH) shares climbed over 5.8% in after-hours trading Thursday. The builder is to report results this morning, a quarterly loss is expected.

Sony Ericsson, the joint venture between Sony (NYSE: SNE) and Ericsson (NASDAQ: ERIC) warned Friday it might not see any profit growth in the second quarter, due to slowing demand for some of its higher-priced phones and a delay in shipping new models to the market and will also experience a gross margin squeeze. ERIC shares are down about 6% in premarket trading.

Well, I can't predict when the market will turn, or when Toyota's (NYSE: TM) stock will once again be in favor, but I can tell you that I won't be buying its shares here. According to this article, Toyota may not do as well as it planned in terms of sales in 2008 in the U.S. market. The company told investors that year-over-year growth in the number of cars sold is now in question. In 2007, Toyota moved 2.62 million automobiles in the U.S., and for 2008, Toyota wanted to sell 2.64 million cars.

I probably don't need to say it, but I will: considering the negative trends in oil futures, gas prices, consumer confidence, inflation, recession potential, and the housing industry, the fact that the stocks of Toyota, General Motors (NYSE: GM), and Ford (NYSE: F) are having a really tough time right now is not surprising. Toyota's stock closed down 2% on the news of the sales struggle at the end of Tuesday's trading session. That's not a particularly horrible downward move, and the stock is still a few bucks above its 52-week low, but I think there's a chance the stock will take out that low at some point.

Investing in the auto industry might be a dicey move here. Sure, you could pick up some bounces, but being early in this space could prove depressing for even the heartiest investor. Auto sales might get worse before they get better (they're pretty bad now as it is), so I'll stay away from Toyota and this sector.

Disclosure: I don't own any company mentioned here; positions can change at any time.

The bad news just keeps coming for General Motors (NYSE: GM). The beleaguered auto giant has announced that it will offer 0% financing to help get rid of its growing inventory of inefficient trucks and SUVs, even as it is forced to raise prices due to higher raw material costs. Its once proud Hummer brand is now an albatross that the company is considering unloading. And its market cap of $7.5 billion is lower than not only Toyota (NYSE: TM) but also ailing Ford (NYSE: F) -- GM has lost so much value that a writer at CNNMoney is making the argument that it should be removed from the Dow Jones Industrial Average.

One bright spot for GM has been the Chevy Volt, a hybrid car that has generated considerable excitement in the automotive press. The design of the car is groundbreaking, with a large battery that is recharged by a small gas engine. This is an advance over the popular Toyota Prius and other hybrids, which are essentially gasoline-powered vehicles that use batteries to improve mileage and emissions. With the Volt, scheduled for production for the 2010 model year, GM could claim a real technological advance for the first time in years, and maybe regain some market share.

But there's only one problem: it is highly unlikely that GM will be able to deliver the Volt as promised, according to an Atlantic piece about the car. The article is filled with fascinating details about the ongoing development of the car, especially the frantic pace and rapid innovation required to get the car into production shape. But an unnamed executive told the magazine that this is exactly the problem. The development process has been too compressed, which will force GM to either fail to meet its target date or, worse, to deliver an inferior product. As the executive put it, "They're making a huge mistake."