bizzXceleration: Performance, Value and Profit

The United States of ToyotaThe world's No. 1 carmaker has ingratiated itself into U.S. life and become an 'American' company, capitalizing on years of mistakes by Detroit's Big Three.Things were different back then. Chevrolet was, far and away, the most popular car in America. It was truly one of the all-American brands, an icon along with Coca-Cola (KO, news, msgs). And its theme "See the USA in your Chevrolet" went on to become one of the most memorable and popular themes in automotive advertising history.General Motors (GM, news, msgs) was on its way to flat-out dominating the American market, and its Chevrolet division dominated almost every segment it competed in with a remarkable combination of style, performance and value that no other car company could match. But a lot has happened to America and its car market since then.Today, the U.S. automotive landscape is fundamentally altered. Japanese carmakers are part of the American automotive establishment. They build their cars in factories all over the U.S., with American white-collar and blue-collar labor. The Europeans, led by the Germans, have taken broad swipes out of the performance and luxury segments in this country, too.

Toyota Recall Anxiety In seven decades, the Toyodas have driven their company to global dominance. They manufacture vehicles in 27 countries and regions and sell them in more than 170. They employed 299,394 workers and brought in $197.3 billion in sales in the year ended on March 31, almost double the sales of the same period a decade earlier. Through holdings in 14 Toyota Group suppliers, they oversaw another 126,638 people and $120.2 billion in revenue as of March 31. In this year's first quarter, Toyota passed GM for the first time to become the world's biggest automaker by unit sales. Toyota sold 2.35 million vehicles -- 88,000 more than GM did. Toyota held on to the lead in the first half, although GM outsold it by 38,000 vehicles in the second quarter. A dominant Toyota faces unfamiliar challenges. For most of their automaking history, the Toyodas were underdogs struggling against Detroit's juggernaut.

The Fall of Detroit: Insider Sees Errors of 1970s in GM Strike  The current talks focused on GM's request that the union take control of a new retiree health-care fund. The fund would pay out future liabilities estimated at $50 billion in exchange for a one-time payment into the fund from the automaker, people familiar with the talks said last week. The two sides agreed in principle to the fund, the people said. The talks then stalled over issues unrelated to health care, including the UAW's demand that GM commit itself to preserving U.S. jobs, Gettelfinger, 63, said yesterday in a Detroit press conference. The danger for both sides is that they may wind up reliving the 1970s. Back then, as we GM workers clashed over benefits, speed, safety and pay, a generation of car buyers turned to Toyota Motor Corp. in search of quality. GM's share of the U.S. market has tumbled from 46.9 percent in 1976, when we walked out at Fleetwood, to 23.6 percent today. The site that reverberated with the shouts of 5,500 laborers, whirring power tools and fire-spitting welding guns is a weedy lot stacked with shipping containers for global trade.

GM's Wagoner Must `Put Up or Shut Up' Now That Union Agreement Is in Hand General Motors Corp. Chief Executive Officer Rick Wagoner has just about run out of things to fix or sell at the biggest U.S. automaker. Now he has to get more Americans to buy Chevrolet Malibus and Cadillac CTS sedans. In reaching a new United Auto Workers contract to shed $50 billion in future medical costs, Wagoner achieved almost all of the savings he identified in 2005 as key to GM's survival. He started closing 12 North American plants, pared $9 billion in annual expenses and got 34,400 employees to take buyouts. ``It's a little bit of `put up or shut up' now that the contract is done,'' said analyst Rebecca Lindland of Global Insight Inc. ``It's not like this is going to show up right away on the quarterly balance sheet, but it does put a lot of pressure on GM to start selling cars and trucks.'' Wagoner is counting on new models such as the Saturn Vue sport-utility vehicle to stem $12.4 billion in losses in 2005 and 2006 and reverse an eight-year U.S. sales decline that spans his time as CEO. His aim is to win buyers for Detroit-based GM who have been increasingly choosing Toyota Motor Corp. brands. While GM's domestic market share has slid to 23.6 percent through August from 28.1 percent in 2000, Toyota's has almost doubled to 16.2 percent.

Once Again We’re Driving What’s Not Made Here The foreign companies against whom the Big Three compete are selling more and more cars that are not made at their factories in the United States, making labor costs here less important. They are importing again — in fact, quietly importing almost as many cars as they did in the 1980’s when Japanese vehicles flooded the market, provoking an outcry, and also import quotas. But imports are once again rising, and the message is that shrinking labor costs within the United States won’t be enough. In a global economy, there are too many ways to gain market share. The Big Three seem to be absorbing that view. They struggled in the 1980s to get the foreign manufacturers to locate in the United States, thinking initially that it would be easier to compete with them here. But now Chrysler and General Motors are already either importing vehicles from Europe, China and Australia for sale as American models, or arranging to do so, making labor costs at home less relevant.

Seeking a Cure for Automotive Ennui New-car sales are sagging in America and car makers are blaming the housing slump or the credit crunch. I suspect something else. I suspect boredom. Under the hood, too many cars sold in America are equally uninspiring. Car makers have done wonderful things improving upon century-old gasoline internal-combustion engine technology. But it's still a century old. It's as if, instead of the iPod, we still got our music from lacquer records that had been refined to hold 100 minutes of songs. Americans -- consumers, car makers and regulators -- have only themselves to blame for automotive ennui. Consumers have been fixated on getting the best deal, and paying as little as possible for fuel -- as distinct from buying cars that use as little fuel as possible. Car makers, particularly the strapped Detroit Three, have been unwilling to take bold technology risks. Regulators and policy makers have done little to encourage fundamental powertrain innovations. Case in point: the pseudo hybrid tax credit, which was rigged to dwindle the more hybrids a company sold. In Europe, as many Americans know, things are different. Say what you will about Europe's affinity for top-down solutions to public policy problems, but it seems clear that the European approach to the issue of automobiles and energy efficiency -- which combines high fuel taxes with tax policies aimed at promoting innovation in small displacement powertrains -- is working better than the haphazard American Way.

GM-UAW Deal Ushers In New EraThe deal struck at 3:05 a.m. yesterday between General Motors Corp. and the United Auto Workers union marks the dawn of an uncertain new era for the American auto industry and its unionized work force. For much of the past half century, Detroit's Big Three auto makers had collaborated with the UAW to create an industrial aristocracy of blue-collar workers whose pay and benefits set the standard for the American middle class. If the proposed contract announced yesterday is ratified by union members -- and is subsequently replicated at Ford Motor Co. and Chrysler LLC -- that era in American industrial history may be over. The contract, which covers about 74,000 U.S. auto workers, restructures GM's obligations to cover health care for UAW retirees. It also sets up a mechanism for the auto maker to buy out thousands of workers, whose wages and benefits total about $70 an hour, and to replace many of them, particularly those in nonproduction jobs, with new employees earning far less. In return, GM has agreed to invest in UAW-represented factories and to make certain improvements to retirement benefits. The proposed contract allows GM to shift to an independent trust $51 billion in liabilities for UAW retiree health care. GM has argued that it cannot shoulder that burden and remain viable. The auto maker could eventually contribute as much as $35 billion to that trust, called a voluntary employees' beneficiary association, or VEBA, people familiar with the bargaining process say.

How U.S. Auto Industry Finds Itself Stalled by Its Own History A big cloud looms over the U.S. auto industry as executives and dealers gather next week in Detroit for the annual North American auto show -- their equivalent of the Oscars. Normally, the cars are the stars. But this year, the industry is riveted by a far more urgent matter: the problems afflicting the Motor City's beaten-up giants, General Motors Corp. and Ford Motor Co. -- and whether they can ride them out. In many ways, the industry's current woes are aggravated by legacies that go back to their days as icons of America's industrial power -- hobbling everything from their sales efforts to their corporate cultures. Early last century, Ford mastered assembly-line production with its Model T and paid $5-a-day wages that put autos in reach of the masses. GM, under legendary early leader Alfred P. Sloan, refined modern management methods and made the car a status symbol. It rolled out a wide range of brands -- and features from tailfins to wraparound windshields -- designed to suit every purse and purpose. Post-World War II deals between the auto makers and the United Auto Workers union set a new standard of ever-better wages, health-care and pension benefits. That helped create a prosperous middle class of consumers, especially in the Upper Midwest -- who in turn drove the car-crazy American way of life. The idea of either company filing for bankruptcy protection was simply unthinkable. No more. Saddled by high labor costs and swamped by foreign competition from Toyota Motor Corp. and others, the two are now symbols not of America's economic might but its vulnerability to more nimble Asian and European manufacturers. In the last two decades, the U.S. market has transformed from a cozy, three-way oligopoly -- including Chrysler Corp., now part of Germany's DaimlerChrysler AG -- to a knife fight among six to eight global players, all of which have substantial manufacturing operations in the U.S., Mexico and Canada. Most industry executives use "legacy costs" as shorthand for health and pension obligations owed to retirees -- usually cited as the industry's No. 1 problem. But GM's real legacy costs constitute a vicious circle that go well beyond those issues, affecting decisions about employees and production capacity, marketing and corporate culture. Progress in one area often hampers it elsewhere.