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GM set to fall

GM concedes it will lose its mantle as the world's biggest car-maker to Toyota

General Motors logo19 Dec 2005

By MARTON PETTENDY

GENERAL Motors could be toppled by Toyota as the world’s biggest car-maker as early as next year, according to a top GM Holden official.

While Toyota expects to manufacture a total of around 8.1 million vehicles this year and GM’s 2005 forecast is around nine million, that situation could be reversed next year – despite GM’s rapid growth in China, where it expects to be number one this year.

The Japanese car giant announced in late November it would build up to 100,000 Toyota vehicles at a Subaru factory formerly controlled by GM in Indiana just days after a loss-making GM revealed it will cut 30,000 jobs by closing 10 US plants before 2008.

The move will reduce GM’s North American production capacity by around one million vehicles and its market share from 26.2 per cent to just 22. GM’s home market share was 33 per cent 10 years ago.

GM has been the world’s largest car-maker for 73 consecutive years and chief executive Rick Wagoner said he expected the company to remain so. But not all GM officials subscribe to the view.

"You can do the math," Holden sales and marketing chief Ross McKenzie told GoAuto last week. "Toyota knocked off Ford in its 100th year (2003) and 2008 is GM’s 100th year, so it might happen early.

"(But) there could be an Asia/Pacific-led recovery. You’re not counting dealer inventory and some plants are not due to close until late 2006, so it’ll be touch and go – but GM may still win (in 2006)." While Toyota is on target to post its fourth consecutive year of record profits, falling sales and rising staff healthcare costs saw GM post a $US4 billion loss in the first nine months of this year.

The plant closures announced last month will cut $US7 billion off its $US42 billion annual bill for operations by the end of 2006, but by 2008 its North American production capacity will have been reduced by 30 per cent to about 4.2 million vehicles.

Meantime, Toyota will add to its 2004 North American capacity of 1.44 million units by opening a new SUV plant with an annual capacity of 200,000 in San Antonio next year, plus a new 100,000-unit capacity RAV4 assembly plant in Ontario around the same time GM’s last planned plant closure takes place in 2008.

While most industry analysts believe it is only a matter of time before GM relinquishes its number one title to Toyota, Holden chairman and managing director Denny Mooney echoed the GM boss last week in downplaying the prospect of bankruptcy for the car giant.

"I think (Rick) Wagoner has been very clear ... regarding the rumours on Chapter 11. That’s not an option for GM. It’s not likely. GM has lots of cash.

"Frankly, it still has plenty of liquidity. Chapter 11 is not a strategy.

"We have challenges ... Obviously, (GM) announced significant job cuts – 30,000 job reductions in the North American operation. It is really getting capacity lined up with demand, quite honestly.

"It’s going to happen fast. I think all the manufacturers are trying to adjust to what’s going on around the world." Mr Mooney admitted the global overcapacity situation was now being experienced in Australia.

"What’s going on here is pretty similar to what’s going on around the world right now," he said. "If you look worldwide, we expect about 65 million new vehicles to be sold around the world this year. This will be another record ... but the capacity around the world is roughly 80 million units.

"What you see globally, from my perspective, is really pretty simple when it comes to market dynamics. You have got more supply than demand. When you have more supply than demand, it creates a lot of pressure on price and margins and it forces all the manufacturers to try to be as competitive as you can.

"Once again, I don’t see this as being unique. I see it going on around the world."

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