The Nation's Pulse

Why Toyota’s Number One

Hint: They have many of General Motors' old customers.

By 5.8.07

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Here's something to chew on:

Circa 1977, General Motors was selling around 250,000 Camaros and Firebirds alone per year. And the two-door Camaro/Firebird sport coupes were "specialty" cars with cramped back seats and tiny trunks -- not mass market family-type cars.

The best-selling car in the United States was an Oldsmobile, the mid-sized Cutlass. GM sold even more of those. The company owned close to 60 percent of the entire U.S. automobile market.

In 1977, Toyota was, at best, a bit player -- purveyor of funny-looking econo-boxes with strange names like Corona.

Today, Oldsmobile doesn't exist at all. The Camaro's in hiatus. Firebird's dead and buried. The best-selling car in America in 2007 is a Toyota (the Camry sedan). And Toyota is now the world's largest automaker, in terms of total annual sales. GM clings to a 24-25 percent market share -- roughly a third of what it once commanded.

Who could have predicting this startling 180 back in the late '70s -- at the very height of GM's glory? Probably no one -- as it would have been unimaginable. American companies dominated the car business. GM was simply beyond challenge. Even Ford bowed low before the Master.

So, what happened?

And who is to blame?

The conventional wisdom is that the American car industry generally was laid low by a combination of gas shortages and hurriedly passed emissions control laws (chiefly, the Clean Air Act of 1970) that left them stuck trying to sell over-large, inefficient vehicles designed for a 1960s market that no longer existed. The Japanese -- who specialized in small, more efficient cars -- got an artificial leg up. They were given what amounted to an "instant market" for their gas-sipping little cars -- and didn't have to amortize the cost of tooling and chassis designs for bloated gas hogs, as GM, Ford and Chrysler were stuck doing.

But if that's so, how come business was still booming -- especially for GM -- years after the original OPEC embargo and Clean Air Act had been passed? Sales of several large, not-so-efficient GM models (notably, the Camaro/Firebird coupes and the Oldsmobile Cutlass) soared, post '75 -- the first year for catalytic converters and the beginning of the "new" era, when MPGs were considered far more important than BHP.

By 1978, for example, production of the Pontiac Firebird alone (not including its sister car, the Chevy Camaro) had jumped to 187,284 (up from 84,063 in 1975). Add Camaro and combined F-car production surpassed the number of Camrys Toyota sells today. For mainstream models like the mid-sized Oldsmobile Cutlass, the numbers were even healthier. GM sold more than 536,000 of these in 1979. The final year of the '70s was, in fact, the second-best year in Oldsmobile's entire 100 year history.

In fact, the death spiral didn't really begin until the '80s. That's when Chrysler fell into bankruptcy -- and GM and Ford began to see their former dominance begin to slip away. But this was almost ten years after the passage of the Clean Air Act of 1970; public concerns about fuel economy were not news anymore. Or shouldn't have been.

It's true there was another energy crunch toward the end of the '70s -- and it definitely hurt the car business, generally. But gas price spikes and shortages were no longer an unexpected left hook that caught everyone with their pants down.

No, what sealed the doom of American car companies was not high gas prices -- as such. It was simply that the Japanese listened to customers and produced cars the market wanted -- while Detroit took its customers for granted and mostly ignored them, building cars managers wanted but which customers increasingly did not.

While Honda and Toyota worked hard to incrementally improve cars like the Civic, Tercel/Corolla and Camry/Accord, GM continued to produce dated designs long after they'd become obviously obsolescent. Or -- as Ford notoriously did -- produced a car like the Taurus that actually sold well for a time, then left it to rot on the vine until it became a "rental car special" has-been. (Someone's head should have been on a platter for that job.)

GM also had a real problem with rushing cars to market before they were ready for prime time (the Cadillac Allante comes to mind) or "cheaping out" a design that had great potential -- like Pontiac Fiero, which was welcomed with rave reviews when it appeared in 1984 -- until people found out about its Chevette-based chassis/suspension and sketchy build quality.

There were constant problems with quality control -- and customer treatment, too. People finally got sick of it -- and left for greener pastures. Many have not returned and aren't likely to unless the mainline Japanese automakers suddenly start building inferior vehicles and treating their customers with contempt.

The domestics also sat on their hands during the birthing of the Japanese luxury car spin-offs in the late 1980, early 1990s. They kept on selling arthritic old boats with fake convertible tops and wire wheel hubcaps for the Strom Thurmond set while Acura and Lexus peeled off younger buyers and began to seriously challenge top-shelf German and British luxury car brands like BMW, Benz and Jaguar.

In 1989, there was no Japanese luxury car segment. Today, the Japanese are among the major players.

What excuse is there for this criminal negligence? Lexus, Acura and the rest didn't steal their customers. Lincoln and Caddy gave them away.

The indictment doesn't end with luxury cars, either. As recently as two or three years ago, there wasn't a single domestic brand small car that could be considered the equal, in terms of refinement, build quality and technical advancement, of the import "benchmark" small cars, Honda's Civic and the Toyota Corolla. GM was still selling the crickety old Chevy Cavalier -- a car that should have been discontinued at least five years previously, or completely re-done. Ford tried a succession of "world cars" -- including the ill-starred Contour and Mystique. Belly flops. Every couple of years, there'd be a new model -- often with an entirely new name -- and zero "brand equity." People didn't recognize them -- and didn't want to take a chance on them, either.

An example: Ford's Lincoln division launched the Zephyr back in 2005 -- then decided that wasn't right and changed it to MKZ. Same basic car -- a new name. Who knows? And more to the point, does anyone care? Lincoln is looking kind of green. It even allowed the once big-selling Navigator -- which pretty much created the premium luxury SUV segment -- to fade into third-tier irrelevance by failing to significantly update the thing for years.

The point to all of this is that persistence -- and a long-term view -- are what enabled Toyota to become the world's largest automaker. Not "unfair trade." Not the competitive hobbling of American automakers by legislative fiat and the ups and downs of gasoline prices.

We are looking at a self-inflicted wound here.

But Detroit is still in denial. Toyota just launched its first true full-size truck -- a monstrous thing armed with an available 381 horsepower V-8 and best-in-class 11,000 pound towing capability. Ford's F-150 (for the moment, still the best-selling vehicle on the market) comes to the table with a swishy in comparison 300 hp V-8 as its most potent offering -- and can't beat the Toyota on towing.

Will Ford -- and GM and Chrysler, too -- snicker at the notion of a full-size "Japanese" truck?

They just might.

And if they do, it will be their undoing.

Again.

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About the Author

Eric Peters is an automotive columnist and author of Automotive Atrocities: The Cars You Love to Hate (Motor Books International) and a new book, Road Hogs.