Other Editorials

The Grapes of Wagoner II

Monday, January 29, 2007

The decline is becoming a free fall laden with excuses and empty promises amongst glamourous extravanganzas whilst we burn like Rome. When will the board FIRE Red Ink Rick? It's well past time for him to go. The man has stripped GM of assets, buried it in long term debt, and now is losing world leadership. You'd suppose that after losing so much share and market cap they would show him the door. If not, it's likely that Mr Flint is right, the day will come soon that Toyota outsells GM in the USA.


Jerry Flint

The General Motors era is over. This year Toyota will overtake General Motors as the world's largest manufacturer of autos, selling something more than 9 million, probably half a million more than GM. This seems certain. It is even plausible that in, say, 2011, when Toyota has built more factories and hired more dealers as GM sales keep falling, the Japanese Godzilla will outsell GM in the U.S. I am not predicting this, just saying it's possible with present trends.

The psychological effect of GM's fall to the number two position will be enormous. Sure, there is maybe one good side to it. People will stop blaming General Motors (nyse: GM - news - people ) for everything that goes wrong in the world. The company won't be blamed for destroying the air we breathe, for not doing enough for safety or diversity, for not saving the polar bears. People don't pick on the second-ranked guy. Yes, William Clay Ford Jr. was the target of greenies, but that is because he said he believed in the cause, which made him a target. Look at the nonsense about blaming GM for killing the electric car. GM really tried to build one, with a unique power system. Toyota (nyse: TM - news - people ) stuck a few batteries in an old RAV4 and then quit on it. But nobody made a movie charging Toyota with killing the electric car.

That's the only good thing about losing that I can think of. The bad things are many. The auto business tends to follow the leader. GM takes off the side vent windows (remember them?), everyone has to remove them or their cars look old-fashioned. If Toyota, when it's number one, puts back the side vent windows (not that it will), GM would have to follow or its cars would seem dated. This will be a painful adjustment.

At first GM will try to prove that it hasn't lost. We call that denial. When GM ruled, it led in technology, inventing or popularizing the automatic transmission, the high-compression engine, the collapsible steering wheel, the catalytic converter--and those great designs. Ah, the '55 Chevy.

But this preeminence has been fading for decades. GM puts four-speed transmissions into its big Cadillac when Toyota has an eight-speed in its biggest Lexus. We all know about those hybrid Priuses. And when it comes to engines, GM still is catching up to the newer overhead-cam designs pushed by the Japanese. We may not understand what overhead cam means, but we buy them.

GM will reach--trying to prove it is still in the technological game. Look at its boast that a plug-in electric car is near production. Toyota people shake their heads and say batteries for such a car aren't in sight yet; come back in a decade.

GM people will come up with new cars that they dream will retake the leadership. I call that desperation. There's the new Chevrolet Malibu, shown at the Detroit auto show and due out later this year. I'm sure it's very good. But to think it could top Toyota's entry in this category, the bestselling Camry, fits nicely into the desperation category.

Ford (nyse: F - news - people ) was first in the world in the early days but lost that title late in the 1920s. It was never the same after GM passed. Ford built some fine cars, such as the Model A, the Ford v-8, the postwar '49, the Mustang and the Explorer, but Ford was always the number two company. At first the company seemed to crawl into a shell. Then founder Henry died; his grandson Henry II took over and hired a team of GM fireballs to retake the title. "Beat GM" was the motto, but that grand crusade died with the failure of the Edsel in 1958. From then on Ford was like a mouse in an exercise cage. No matter how fast it ran, it got nowhere.

This doesn't mean the end of General Motors. Outgunned armies can still fight, hold ground and win battles. But it's not the same as being number one. They don't win the war.

GM was on top for three-quarters of a century, and that's impressive. Toyota won't do that. The world moves faster now. In 15 years maybe the Koreans (Hyundai) or the Chinese (Shanghai Auto) will overtake it.

I might be wrong about GM never regaining the leadership. Boise State did beat Oklahoma. After all GM still is a power, outselling Toyota in North America, Brazil, Europe and China. But Toyota is closing the gap everywhere and leads GM in Japan by millions of sales. And Toyota wins in Africa, the Near East and Asia outside of China.

History doesn't have to repeat itself, and General Motors 2007 is not Ford Motor 1929. The battle is not always to the strongest--but the bookies say it's still the way to bet.

Jerry Flint, a former Forbes Senior Editor, has covered the automobile industry since 1958. Visit his homepage at www.forbes.com/flint.