Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

Previous Posts

Monday, October 09, 2006

Toyota's Growth Brings Tough Challenges, A Ray Of Hope For GM?

Stocks: (TM)(GM)(HMC)

Toyota has become the recall king, something that the company has never had to wrestle with in the past as it won most of the JD Powers and other car quality surveys. But, as the company's market share had balloned in the US, Toyotal has had to ramp up production for North America, and quality seems to have suffered. (Toyota's sales in the US rose 25% in September.)

As Toyota attempts to overtake GM as the world's largest car company, there is new evidence that it growth may be undermining quality. In a new study by Strategic Vision, Toyota's reputation for quality took another hit. In the new survey, Honda took the largest number of categories. GM was second with wins in the small SUV, small specialty, convertibles and heavy duty trucks. Toyota only won in three segments compared to seven last year.

Toyota may now be facing the headwind that large manufacturers like GM had in the past. With a larger model line, more factories, and a greater number of vehicles being produced, keeping quality high becomes more and more challenging. In the same survey by Strategic Vision, BMW placed highest in vehicle quality but was not included in overall results because it makes only luxury cars. But, with a modest number of models and smaller production, BMW has a better chance at quality control in each vehicle. Or, at least the is the working theory.

Mayby, just maybe, the perception that Toyota does not make the world's best cars could help GM.

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

Powered by Blogger