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Wednesday, September 20, 2006

Will Toyota Miss Its Sales Forecast? (TM)(GM)

Talking big and walking tall, the head of Toyota said overnight that the company would sell 9.8 vehicles worldwide in 2008. That is up from 8.13 billion last year and a forecast 8.85 billion this year. According to The Associated Press, GM sold 9.2 million vehicles in 2005.

Toyota also upped its fiscal year earnings forecast to $4.3 billion from earlier estimates of $3.3 billion for the first six months of the fiscal.

But, Toyota is beginning to pay the price for such a rapid rise in sales. In May, the company recalled almost 1 million vehicles for steering problems. In July, it recalled 160,000 Tundra pick-ups due to faulty airbags. The Japanese automaker recalled another 367,000 vehicles because of problems with the consoles.

Toyota has built the reputation of both its Lexus and Toyota products as much on quality as fuel efficiency. The company consistently ranks high in the JD Power and Consumer Reports car surveys. But, in the same surveys, companies like GM are closing the defect gap.

Accordng to the Car Connection, Toyota understands that the problems could harm its reputation and sales: Katsuaki Watanabe, Toyota's chief executive, said Toyota is aware of the damage the recalls could do to the company's reputation. "I take this seriously and see it as a crisis," Watanabe said in Tokyo. "The world-class quality that we've achieved is our lifeline."

But, as the company builds new manufacturing facilities across the world, it may find that monitoring the car-building process more difficult. And, that could spell more quality products, and, by extension, slower sales.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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