Despite a challenging economic environment, Japanese automaker Toyota Motor Corp. (NYSE: TM) has been continuing its strong competition with rival General Motors Corp. (NYSE: GM) for the title of the world's largest automaker. As results show, the good times are rolling for Toyota which earlier today posted an increase of 2.7% for its global sales, for a total of 2.41 million vehicles during the first-quarter.

On the other side of the coin, GM announced a decline of almost 1% in its total sales. Last year, General Motors held the crown in global sales, but on the other hand Toyota was the leader in global vehicle production. Both companies benefited from strong demand outside the United States.

General Motors has said that strong overseas sales weren't enough to overcome a weak North American market. The company saw a 10% drop in first-quarter sales in its home North American market as high fuel prices and worries about housing and the credit crunch pressured consumers. Regardless of the weak results, GM restated its desire to "win, and we'd like to be No. 1 in sales at the end of the year."

MAJOR PAPERS:

• According to people familiar with the matter, the Wall Street Journal reported that home-furnishings retailer Linens 'n Things, acquired by Apollo Management in 2006 and caught by a shrinking housing market and increasing debt load, is expected to file for Chapter 11 bankruptcy-court protection by Tuesday.

OTHER PAPERS:

• The Detroit News reported that Delta Air Lines Inc (NYSE: DAL) pilots have agreed to a contract revision that clears the way for Delta and Northwest Airlines Corporation (NYSE: NWA) to announce a merger next week, according to sources close the matter.
• The United Auto Workers union notified General Motors Corporation (NYSE: GM) of its deadline to strike three factories in Michigan if the two are unable to agree on local labor pacts, the Detroit News reported.
• The Business Standard reported that Toyota Motor Corporation (NYSE: TM) is planning to invest Rs 1,400 crore in Toyota Kirloskar Motor, its India subsidiary to set up its second plant in the country.

With people in Japan showing less and less interest for cars, Japanese automaker Toyota Motor Corp. (NYSE: TM) is exploring more efficient methods to increase sales in its strong competition with rival General Motors Corp. (NYSE: GM) for the title of the world's largest automaker. The attempt to boost sales has become even more difficult as, according Toyota officials, young people prefer spending their money on laptops or mobile phones than a car that could be easily replaced by public transportation.

In an attempt to reach younger people and lift car sales, Toyota is opening a new mall located in Yokohama, southwest of Tokyo. The new Tressa mall is pretty much like any other malls, with 220 stores and restaurants like cafes, clothing stores and even gym or games centers where people enjoy spending their time. However, in the new mall space, Toyota showrooms take center stage, placing at people's disposal a large variety of old and new cars models.

One thing that Toyota is aware of, and trying to improve upon, is that in Japan showrooms and TV advertising are not efficient any more in attracting people's interest for buying cars. The new mall is aimed at accomplishing Toyota's plan of global domination by providing "opportunities for people to come in contact with cars."

Despite a weak economic environment, Japanese automaker Toyota Motor Corp. (NYSE: TM) is continuing its strong competition with rival General Motors Corp. (NYSE: GM) for the title of the world's largest automaker. The auto industry competition has become even stronger as new rivals appear in China, Russia, South America and other regions. In its attempt to claim sole dominance of the auto world, Toyota plans to gain ground in new markets by focusing on finding more efficient methods to build its cars.

One example of Toyota trying to think "outside the box," can be illustrated by a training practice put in place at the automaker's training center located inside its Motomachi assembly complex. The company has been having some workers using golf balls in order to exercise and make their fingers more flexible. A part of the training involves workers using their concentration to make two balls they hold in each hand roll in opposite directions. Sounds a little crazy, but the practice is designed to improve their skills on tasks regarding the assembly line of cars they build.

This is all aimed at accomplishing Toyota's plan of global domination. One thing that Toyota is aware of, and trying to improve upon, is its ability to run efficient operations in countries outside of Japan. Consider this... Toyota currently operates plants in 27 countries, with plans to build in even more locations. Where the potential trouble comes into play is the fact that key management jobs in each country are held entirely by Japanese executives who decide all the company's major operations and strategic plans.

Despite a shaky economy where recession concerns deepen each day, car demand is booming for at least one major auto maker. It looks like even in a recession people continue to need cars, and the good times are rolling for car maker Honda Motor Ltd. (NYSE: HMC), which reported that its profit rose 38.1% in the third-quarter. For this period, Japan's second-biggest automakers counted strong sales for its fuel-efficient models in the U.S., Europe and Asia.

Honda's third quarter profit climbed to 200 billion yen ($1.87 billion), compared with 144.8 billion yen in the same period last year year. Cost-cutting also made the automaker post a record gain in its earnings numbers during the fiscal third quarter.

One of Honda's best competitive advantages is its strong reputation for providing more fuel-efficient cars. Thus, the recent surge in oil prices helped Honda's sales to jump 10% to 3.045 trillion yen ($28.52 billion).

Toyota Motor (NYSE: TM) is expected to report Q3 EPS on February 4.

TM overall option implied volatility of 26 is above its 26-week average of 23 according to Track Data, suggesting larger risk.

Honda (NYSE: HMC) volatility flat; shares near one-year low.

HMC is expected to report Q3 EPS on January 30.

BAMO says: "New products should boost HMC's earnings."

HMC overall option implied volatility of 26 is near its 26-week average according to Track Data, suggesting non-directional risk.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Toyota Motor (NYSE: TM) beat up on General Motors (NYSE: GM) in 2007, and the company wants 2008 to be the year in which it officially becomes the world's largest automaker by sales volume. To kick off the new year, company CEO Katsuaki Watanabe recently released Toyota's resolutions and initiatives for 2008.

Watanabe highlighted the plight of global warming to start his message off. Surprised? Don't be -- he then indicated Toyota would be involved with three areas of sustainability in 2008: research and development, manufacturing, and social contribution. Watanabe's concentration on the eco-friendliness of the auto industry to begin his 2008 initiatives hinted at where the company was going with its hybrid automobile focus. Sure enough, Watanabe said that Toyota wanted to have a hybrid model in all consumer vehicle model lines in Japan as soon as possible.

But then, Watanabe dropped quite a large hint that Toyota was becoming heavily involved in the manufacturing and design of batteries and alternative energy research. This makes sense, as current hybrid models need to increase in the cost/benefit arena if consumers are ever going to be swayed to purchase them en masse. Watanabe also mentioned Toyota's involvement in "sustainable mobility" as it applies to infrastructure and energy.

In essence, Watanabe's entire message for 2008 centered on alternative vehicle propulsion and energy generation more than anything said about the competition. Will Toyota become the biggest "green" company on the planet through its efforts? When it comes to one of the larger contributors to greenhouse gases -- automobiles -- it surely could. Will its efforts pay off with more sales in its global markets? Shareholders hope so.

Although Toyota Motor (NYSE: TM) basically invented the popular notion of hybrid vehicles years ago by making the Prius compact passenger car the spokescar of the hybrid world, the automaker now has its sights set a little higher. Toyota wants to sell at least one million Hybrid cars every year shortly after 2010 gets here.

Although Toyota was not the first automaker with some form of hybrid vehicle on the road, it's been the most aggressive marketer of such technology and resulting vehicles by far. Although the hybrid Prius has sold only 1.25 million units since first being introduced in 1997, Japan's largest automaker thinks that mark can be hit annually within a few years. Are those plans too ambitious?

If fuel prices stay at the level they are at now, it's not inconceivable to think Toyota can't hit that mark. The automaker has publicly said that it wants a hybrid drivetrain in every vehicle it sells come 2020, so to get that kind of expertise ramping, it needs to move quite a few hybrid vehicles this year and increase that amount every year going forward.

The internal combustion engine still is not perfected, so transitioning millions of vehicles to a hybrid drivetrain in a little over a decade sounds like a risky plan to many. If Toyota can start selling a million of them per year long before that, though, it just may have a chance.

Toyota Motor (NYSE: TM) and Honda Motor (NYSE: HMC) both said that production was increased for growth in overseas markets in November. Toyota built over 803,000 vehicles and Honda produced over 363,000 vehicles in November to satisfy demand in emerging markets and to find equilibrium in global markets based on currency fluctuations.

Nissan Motor also increased production in November -- by 15% -- producing over 335,000 vehicles. With Toyota's new Russian plant and increasing Chinese sales, the Japanese automaker is taking a hard look at growth outside of the slow U.S. market that's expected in the first half of 2008.

But U.S. automaker General Motors (NYSE: GM) is not sitting still either, having set its sights on Russia and China (and India as well) in 2007 as it braces for a slowdown in U.S. sales in 2008. Just like many other industries, emerging markets like India and China are becoming hot markets for auto sales. I'm surprised it took until 2008 for this to become a focus area for global automakers.

Toyota Motor (NYSE: TM) said this week that it plans to speed up its cost-cutting efforts globally in 2008, which should save it up to $2.7 billion annually. The world's largest automaker by unit volume is being squeezed with higher commodity costs and product development costs, just like domestic automakers in the U.S. Same song, different verse.

Toyota President and CEO Katsuaki Watanabe said, "I would expect to exceed what we've done under the previous plan," alluding to previous cost-cutting efforts that have been made and measured on a per-vehicle basis in recent times. Watanabe said that cost cuts should "grow every year" as sales rise. Sounds like a one-two punch to me. Is it feasible for Toyota, which has been stung by some bad safety PR recently?

Toyota's Value Innovation (VI) cost-savings plan has been in the works since 2005, and meant to group the thousands of components in every Toyota vehicle into a series of modules and systems -- in effect, simplifying design and saving tremendous costs when scaled globally across all platforms. Watanabe added, "I believe the strategy is basically proceeding as planned." The competition is, of course, not standing still when it comes to cost cuts, but those are mostly in labor and production capacity.

Japanese automaker Toyota (NYSE: TM) stole the hybrid vehicle marketing limelight years ago with its Prius passenger car -- you know, the one that has a gas mileage figure of over 50 miles per gallon. Due to combining a smaller gasoline engine with an electric motor, the smaller car has a remarkable fuel efficiency rating, and the word of mouth that started selling the Prius to ecologically-aware consumers and assorted environmentally-conscious folks was like a wildfire in the passenger car market. The waiting line to buy one was half a year in many cases.

Although many detractors say the Prius' claimed gas mileage is not what it's cracked up to be, the popularity contest has already been won. The next step for Toyota would be to make the nameplate in an all-electric fashion instead of a hybrid design that still uses gasoline. The trouble is, no company can produce an all-electric car that has the same amenities as the modern internal combustion vehicle: range, comfort, size, price and design. If anyone can ever make this a reality, though, it would be Toyota (although an effort is still plenty of years off).

Until then, perhaps the automaker is looking at plug-in electric hybrid vehicles for Act II of its hybrid car marketing strategy? At the recent Tokyo Auto Show, Toyota showed off designs that use a hybrid propulsion system that contains a larger battery, allowing the vehicle to travel short distances at highway speeds powered by the electric motor alone, instead of the motor just being used in city stop-and-go traffic. The battery pack would need recharging at night, instead of being charged by regenerative braking like in current designs, but all things considered, this would be the next step to an all-electric design that uses little to no internal combustion (or gas). Whoever gets there first will hold the holy grail of sales to customers needing smaller passenger cars. General Motors (NYSE: GM) isn't sitting still at all, though.

Sales of Toyota (NYSE: TM) and Ford (NYSE: F) vehicles in China grew by leaps and bounds during the first half of the year, according to the latest estimates. While Ford saw a growth rate of 25% to just over 93,000 vehicles sold in China, Toyota witnessed a staggering 77% increase to 212,000 vehicles during the same January-July sales period, based on increasing sales of the Camry sedan.

Ford saw great sales of the Focus Sedan, which totaled in at just over 55,600 units for the first half of the year. Meanwhile, Toyota was helped along with its Chinese-based sales due to the immense popularity of the Camry sedan, which -- coincidentally -- has been the best-selling car in the U.S. for eight out of the last nine years. Toyota's Chinese Camry started rolling off assembly lines just over a year ago from a new plant in the Chinese city of Guangzhou with the goal of taking market share from Honda's Accord and other competing passenger cars. In doing so, the new Camry sold 78,000 in the first six months of 2007. Not a bad start at all.

Is China the next mecca for automakers who may see sales slowdowns in the U.S. based on high gas prices and housing worries that don't seem to be going away? China and India are not only the hottest new markets for retailers but for automakers and any other industry that needs to sell products to participants in burgeoning economies. The numbers Toyota and Ford have so far in 2007 seem a little low to U.S. sales numbers, but I have little doubt that they won't stay there.

The news coming out of Detroit these days is sickening. Not so surprising, maybe, but nauseating nevertheless. The bloodletting at Ford Motor Company (NYSE:F) and the woes at General Motors (NYSE:GM) is like watching a train wreck in slo-mo.

But it's not surprising. With the SUV craze finally on the wane (thanks to gas prices that are only going to go up from here), Detroit doesn't seem to understand what regular folks want to drive: Well-made, fuel efficient cars. Doesn't hurt if they look cool, too.

Somehow Toyota learned that lesson a long time ago. What's extremely ironic is that its quality and production principals were learned from a U.S. Army education program during the Post-war era.

Whereas my parents, who came of age in the '50s, would never dream of driving a Japanese-made car, I learned to drive on a Toyota and would never drive anything else (OK, maybe a Honda...or a Beemer). My only experiences with American-made cars -- rentals all -- were less than impressive. And judging from Detroit's latest sales figures, I'm not the only American driver who doesn't like sluggish, gas-guzzling vehicles.

Toyota clearly sees the future. Jim Cramer's been jumping around about the stock for a while now, and all he cares about is the bottom line. Is there any hope for the fat, ugly Americans?

Finally, finally I don't have to repeat myself. Yesterday stocks broke their 6-day losing streak, the longest since 2005. This morning, the day of the U.S. midterm elections, futures are mixed, pointing to a higher start for the S&P 500 and a lower start for the Nasdaq.

Yesterday could have been interpreted as a reaction to today's election results, although the many deals certainly gave the market a boost. Despite polls suggesting Democrats could take control of he Congress, it is still a close race. As for the Senate, it is too close to call. Right now, consensus seems to support a short-term gain for stocks if Republicans remain in control of both houses, while stocks could get a long-term lift if the Democrats win control in one house, thus splitting the control of the houses.

There is one economic data to be released today at 3:00 p.m. - consumer credit.

In what could probably be sign of the times, the chairman of the Securities and Exchange Commission, Christopher Cox posted a first official communication to a blog. His message? Cox is looking into letting companies use blogs to disseminate important corporate information.

Home builder Toll Brothers Inc. (NYSE:TOL) reported a 10% decline in fourth-quarter home building revenue, saying the housing market is still weak. The company also cut 2007 outlook due to slower market conditions and said that while it doesn't see signs the market is improving yet, it could start picking up once the current inventory is absorbed.

In corporate news:

According to the Wall Street Journal, Verizon Communications Inc. (NYSE:VZ) said it is in advanced talks with Google, Inc.'s (NASDAQ:GOOG) YouTube Inc. Verizon wants to to bring YouTube content to cellphones and television sets. This could give Verizon a marketing edge.

Microsoft Corp. (NASDAQ:MSFT) announced that Xbox Live users could soon start downloading TV shows and rent movies. Microsoft has teamed up with several Hollywood studios. The shows could be downloaded through Xbox Live online video-game service and beamed straight onto television sets.

Toyota Motor Corp. (NYSE:TM) posted a better-than-expected 44% rise in quarterly operating profit and lifted its full-year forecasts. Toyota cited robust sales, cost cuts and a soft yen offseting higher raw materials prices as reasons for the sharp gain. Toyota's fuel-efficient and hybrid cars gained ground in both the U.S. and Europe.

Shares of RealNetworks, Inc. (NASDAQ:RNWK) gained more than 5% in after-hour trading as last night it reported a third-quarter profit that nearly quadrupled. Revenue rose 14%. The company earned $42.2 million, or 24 cents per share. Analysts expected 22 cents per share.

Chrysler Group will go through a major restructuring due to declining sales. The company's plan is extraordinarily ambitious. It plans to cut the costs of producing every vehicle it manufacturers by $1,000. The company may also seek longer-term relationships with suppliers in exchange for better pricing. What's more, a plant may be closed.

Chrysler's parent, DaimlerChrysler (NYSE: DCX) , will also send a hit team of senior officials from Germany to review marketing, production, and purchasing practices. These must be things that the Germans do better than their American counterparts.

Chrysler has now caught the flu that has been spreading around Detroit and has caused Ford Motor Co. (NYSE: F) to work on cutting $5 billion in costs a year while General Motors Corp. (NYSE: GM) is targeting $9 billion. GM, Ford, and Chrysler sales have been poor this year despite a reasonable September. But Toyota Motor Corp (NYSE: TM) and Honda Motor (NYSE: HMC) have continued to pour on the coals as they gain share almost every month.

As Jerry Flint, the venerable car writer from Forbes has pointed out, costs are not Detroit's problem. The Big Three simply don't make enough cars that buyers want.