By now, many of you have probably heard that Toyota has just toppled GM in Q1 2007 worldwide sales. Granted, it's only for the quarter, but many are predicting this might be a prelude of the 2007 annual sales results. Okay, I admit it, my jingoistic, flag-waving, cowboy hat-wearing, country music-listening side cringed just a little at this news. But in all reality, it wasn't that much of a shock. A lot of people saw this coming for quite a while.
So what does this mean in the greater scheme of things? Well, unlike some Toyotaphiles who believe the Japanese behemoth can do no wrong, and that the General is the epitome of evil American imperialism, I don't think it signals GM's imminent demise. I do think it's going to result in some passionate and frank discussions in Detroit among the top brass. Granted, percentage-wise, in the U.S. Market, GM still holds a sizeable sales margin over Toyota. But, this is with eight often overlapping and nebulously-defined divisions, as opposed to Toyota's lean and focused three.
So how did the industry come to this historic crossroads? I think some of it is rooted in the distinctives of Japanese and American culture. Let's look at what Americans are good at. We're consummate deal-makers, very creative, enterprising and entrepreneurial. The flip side is, once we find success, we tend to be complacent and self-satisfied. On the business side, we tend to focus on quarterly results above all else. While this short-sighted mentality may ensure short-term survival, longer-term, strategic investment and planning often suffers.
Japanese culture, on the other hand, tends to value community, conformity, consistency, and takes great pride in detail and craftsmanship. While they look at short-term results, far more important is the long-term plan. Though nobody outside of its hallowed halls has probably seen it, Toyota reportedly has a 100-year plan. Such long-term thinking in American business would likely be seen by many as foolish or insidious.
I believe another factor is GM's somewhat provincial mentality. While hometown pride is one thing, when it blinds you to the reality of what's taking place in the larger world, there's a real danger there. Many friends and co-workers that have visited Detroit have commented on the disproportionate amount of domestic cars around, far more than most urban areas around the country. Like I said, hometown pride is good. But when it gets to the point where you're drinking your own Kool-Aid of complacency and delusion, that's when your competition sneaks up on you. And that's precisely what Toyota has done, slowly but surely, over the past several decades.
Although it would be tempting to simply crank up the sales volume just to have bragging rights for next quarter, GM would be far better served by scaling back further, doing a thorough audit of its worldwide production capacity, looking at mature and emerging markets, and doing what it can to get a handle on its labor and legacy costs. From all indications, that's precisely what it's doing.
GM should take advantage of its time out of the spotlight to re-group, focus and cook up its business plan for the balance of the next decade to be able to re-claim its sales crown 5-10 years from now. Immediate results are good, but long-term health and viability is more important.