Toyota snatches No. 2 spot from Ford

Japanese carmaker’s sales rose 3.1% in 2007; it could overtake GM as world’s largest automaker this year.

Bryce G. Hoffman / The Detroit News

Fifty years after Toyota Motor Corp.’s first tentative foray into the U.S. market, the Japanese automaker has soared past Ford Motor Co. to claim the title of No. 2 car company in the United States.

Though 2007 was a tough year for the entire industry, Toyota seemed unstoppable. The automaker not only toppled Ford from the pedestal it had occupied for 75 years, but it also is poised to surge past General Motors Corp. to become the world’s largest automaker in 2008.

Toyota’s U.S. sales increased 3.1 percent in 2007, with 2.6 million vehicles sold in the United States, compared with 2.5 million in 2006. The industry as a whole saw sales drop 2.5 percent from 16.6 million units in 2006 to 16.1 million units last year.

All three of Detroit’s Big Three automakers reported weaker sales. Ford posted the sharpest decline, with sales dropping 12.1 percent; GM’s sales were down 5.9 percent; and Chrysler LLC’s sales dropped 3.1 percent.

GM ended the year with 23.5 percent of the U.S. market, followed by Toyota with 16.2 percent and Ford with 14.8 percent. Chrysler was in fourth place with 12.9 percent.

The other Asian automakers also gained market share in 2007.

Honda Motor Co.’s sales were up 2.8 percent; giving it 9.6 percent of the U.S. market. Nissan Motor Co. saw its sales rise 4.8 percent and its market share increase to 6.6 percent.

Mazda Motor Corp., which is controlled by Ford, saw the biggest sales increase of any manufacturer, with U.S. sales soaring 10.2 percent, from 268,786 to 296,110.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, called Toyota’s progress in 2007 "a milestone," but cautioned against making too much of it.

"When you look at what’s really impacting the sustainability of these companies, it’s not market share. It’s profitability," he said, adding that Ford is making real progress on getting its North American automotive business back into the black. "They’re on the right track. It’s going to be a tenuous couple of years, but they know what to do and they’re doing it."

Ford posts biggest drop

"While the decline is relatively large, much of it was anticipated," said George Pipas, head of sales analysis and reporting at Ford.

He said much of Ford’s decline was due to efforts to cut back on sales to daily rental fleets, which are less profitable than retail sales and tend to undermine resale values. In late 2006, Ford halted production of the Taurus sedan, a vehicle which had sold 175,000 units, mostly to car rental agencies.

Ford also exited the lackluster minivan segment to make room for its new crossovers, which have since emerged as the fastest-growing segment of the U.S. market. Thanks to new crossovers like the Ford Edge and Lincoln MKX, it has emerged as the segment leader, with crossover sales increasing by 62 percent in 2007, compared with 17 percent for the industry as a whole.

However, the Dearborn automaker acknowledged that retail sales in November and December slipped below the company’s target of 13 percent, creating a fresh challenge to its "Way Forward" turnaround plan.

"Clearly, we have to arrest the decline," Pipas said.

Bob Schulz, automotive analyst for Standard & Poor’s, said the emergence of the crossover segment was one of the defining trends of 2007.

"You continue to see the shift to passenger cars and crossovers and away from large SUVs and pickup trucks," he said. "Ford and GM are well-positioned in the crossover market, but it is very competitive."

Trucks and crossovers outsold passenger cars in 2007, accounting for 53.1 percent of the overall light vehicle market.

Lower fleet sales add to losses

GM also blamed much of its decline on lower daily-rental fleet sales.

That accounted for about half of GM’s sales loss last year, according to Mark LaNeve, vice president of North American vehicle sales for GM. He added that GM also eliminated several models as it worked to streamline its eight brands.

The lack of those deliberate cuts bodes well for next year’s sales, LaNeve said.

Chrysler blamed its sales decline on the weakening demand for trucks and sport utility vehicles.

One bright spot was the Dodge Grand Caravan, which remained the country’s top selling minivan — edging the Honda Odyssey on strong December sales.

Chrysler expects the 2008 vehicle market to decline, but President Jim Press vowed to increase retail sales while joining the other domestic automakers in cutting back on sales to daily-rental fleets.

"Our total volume may not be greater than the prior year, but the stuff that counts, retail, will continue to improve in 2008," he said.

Toyota credits fuel economy

Bob Carter, head of the Toyota division in the United States, credited his company’s gains to a "fuel efficient lineup and the staying power of our passenger cars."

Toyota is the leader in hybrid vehicles, and Carter said such products account for 11 percent of the company’s total volume. He said hybrid sales will likely be flat year over year in 2008, largely due to capacity constraints, but acknowledged that Toyota’s estimates tend to be conservative.

Sales of the popular Toyota Prius hybrid were up a whopping 69 percent in 2007. Toyota also benefited from the launch of its new Tacoma pickup, which Carter said has already become the half-ton leader in California.

As for outpacing Ford and GM, Toyota was characteristically modest about its gains.

"We don’t pay a lot of attention to rankings," said Toyota’s group vice president of corporate communications, Irv Miller. "What’s more important to us is maintaining our position with consumers."

Experts like Cole say Toyota’s growth is a mixed blessing for the automaker, which had its share of quality issues in 2007.

"Their system is very strained right now," he said, pointing to quality issues with Toyota’s new pickup — a problem he said received more attention in the press than it might otherwise have because of the automakers phenomenal growth. "Everybody kind of cranks up the microscope when you’re on top. It’s not an easy place to be."

December sales also down

While still down, December sales were slightly better than analysts had expected — at least at GM and Chrysler.

Chrysler posted a modest half-percent gain in December, with sales of 191,423 compared with 190,415 for December 2006.

GM’s December sales were down 4.2 percent year-over-year, dropping from 330,966 to 317,089.

Ford’s sales fell 9.5 percent, from 215,490 to 195,105.

Toyota sales were also down, falling 1.7 percent year-over-year, from 228,322 to 224,399, as was Nissan, which saw its sales drop 2.4 percent from 91,775 to 89,555.

Honda’s sales were flat at 131,792 units, compared with 131,778 in December 2006.

Overall industry sales fell 2.9 percent in December, from 1,431,405 in 2006 to 1,389,690.

That augers an even more dismal 2008.

All of the automakers expressed concern that the same issues that eroded sales in 2007 — rising fuel prices, tightening credit and a weakening economy — will continue to plague the industry in 2008.

Concern about weakening sales drove GM and Ford’s shares to new 52-week lows Thursday. Ford shares closed down 15 cents at $6.45, while GM closed down 49 cents at $23.92.

"I think 2007 will be looked at as a historic year that will shape the industry for years to come. We’ve really gone through three major phases in the industry in 100 years and we’re in the middle of shifting into a fourth one," GM’s LaNeve said.

"Over the next couple of years, we’re going to be duking it out for leadership, not just in sales but for reputation."