Toyota Overtakes Ford as World's No.2 Carmaker

Japan's Toyota Motor Corp has unseated Ford Motor Co as the world's second-biggest auto maker.

The long-anticipated switch came as the US "Big Three" lost customers to Japan's top auto makers in their own backyard last year, and as Toyota drove aggressively into the red-hot Asian car market, a weak spot for US makers.

Toyota is steadily marching towards its goal of grabbing 15 percent of the global car market some time in the next decade, from about 11 percent now. That share could put Toyota ahead of General Motors, which said it had 14.7 percent in 2003.

Toyota said on Monday its group - which includes truck maker Hino Motors and minicar maker Daihatsu Motor - sold 6.78 million vehicles last year, up 10 percent from 2002 as it boosted its presence in every major car market.

That was 60,000 more than the 6.72 million vehicles sold by the family of Ford cars, which groups together the Blue Oval brand, Mercury, and luxury marques Lincoln, Volvo, Jaguar, Land Rover and Aston Martin.

While the new ranking marks a symbolic shift in the global auto industry's balance of power, analysts have long argued that rating auto makers by their sales volume is just that: symbolic.

"The significance is similar to the change from the year 1999 to 2000," said Christopher Richter, auto analyst at HSBC Securities in Tokyo.

"It's an event that people will reflect on, but there are more important differences," he said, naming the vast gap in market value as one of them.

Size isn't Everything

Indeed, at over $120 billion, Toyota's market capitalisation - a measure of how much investors believe a company is worth - is more than four times that of Ford, and bigger than the combined stock values of Ford, GM and DaimlerChrysler.

By profitability, too, Toyota is way ahead of the pack.

Its bottom-line profit came to around $7 billion last business year - by far the highest in the industry - and is expected to jump another 27 percent for the year to March 31, according to a survey of 21 brokerages by Reuters Research.

Meanwhile, Ford earned a net $495 million in 2003, returning to the black for the first time in three years. Analysts expect a fivefold increase in earnings this year.

Ford has also been burdened by financial ills.

While its automotive business has $26 billion in cash, it also has billions in pension and health-care obligations, and its rating from Standard & Poor's stands one grade above "junk".

Executives have committed to rolling out new products fast, but models already in the pipeline and due out over the next couple of years will cost more than the vehicles they replace, forcing Ford to scour its business for cost cuts.

In contrast, Toyota has a cash pile of $20 billion, enabling it to spend freely on the development of next-generation environmental and other technology which could give it an edge when and if governments introduce stricter regulations. It can always raise more money: S&P last week raised the outlook on Toyota's top-notch 'AAA' rating to stable.

Losing Sleep?

The new ranking will be seen as a loss of face by Ford, an American icon that has held the number-two spot behind crosstown rival GM for over 70 years - longer than Toyota has been in business. The milestone coincided with its centennial, no less.

Ford executives have publicly shrugged off the event, saying it had deliberately chosen to maximise profits instead of sales.

"I'm not going to lose sleep over it," Chief Operating Officer Nick Scheele said when asked earlier this month about the possibility of being overtaken by the Japanese juggernaut.

But he added: "I would wish we had the same opportunity in their home market that they have in ours. We were the market leader in Japan until we were kicked out in the early '30s...

"Let's be honest about it. We can't sell in the Japanese market. They sell two million units in the Japanese market. Let's take that out and then see where we are."

Japanese records on car ownership from those days are scrappy, but the country had fewer than 150,000 cars, trucks and buses in the early part of that decade. Ford assembled 15,000 vehicles in Japan in 1935, before the military regime ousted US companies out of the country. The Blue Oval brand sold a third of that last year.

Japan's carmakers have come a long way since then.

Toyota President Fujio Cho has called Detroit's "Big Three" a "presence beyond the clouds in the sky", saying the auto maker had no intention of overtaking anybody in Detroit.

But with Toyota's track record, GM executives will surely be keeping one eye on the rear-view mirror.