GFerg

When U.S. automakers teetered on the brink of collapse 25 years ago, Japan-bashing in Detroit was in full swing—literally—as autoworkers took sledgehammers to Toyotas. Today General Motors and Ford are facing another epic financial crisis. But this time, no one is taking a swing at Toyota in Motown. Instead, Michigan's glamorous governor, Jennifer Granholm, stood before a bank of TV cameras last week in the sunny atrium of Toyota's Ann Arbor R&D center and gushed: "We are excited about Toyota's future in Michigan, and we want to roll out the welcome mat." In front of her were a half-dozen smiling Toyota executives who had just closed on a deal for a $150 million expansion of their Michigan research lab, where they will incubate more new models in their drive to overtake GM as the world's No. 1 automaker. Granholm doesn't fear a backlash for her ardent wooing of Toyota (including $39 million in tax breaks). After all, Toyota is offering her constituents something GM is taking away: jobs. "I feel very Darwinistic about this," she told NEWSWEEK. "We have to evolve as a state. It's the world that we're gunning for now, not just the U.S. automakers."

The Americanization of Toyota is at full throttle. The Japanese automaker has abandoned its old doctrine of "cooperative competition," by which it kept a respectful distance behind GM rather than embarrass one of America's trophy companies and invite the protectionist wrath of Washington. Now, as Detroit generates headlines about sinking profits and rising layoffs, Toyota is planning to build two more American factories to keep up with breakneck demand that has led to record sales (it earned more money last year than GM, Ford and DaimlerChrysler combined, and up to two thirds of those profits were made right here in America). That financial capital has given Toyota political capital, and it's spending that, too, with an ad campaign touting the $16.6 billion it has invested in 13 North American factories employing 37,351 workers. "Like immigrants," says Toyota's top American sales exec, Jim Press, "we're becoming part of the fabric of America."

Despite the endless debate about what's plaguing the U.S. auto industry—health-care costs, rich union contracts—there is a simple fact that explains why Toyota is winning: it builds cars people want to buy. And now it's deploying its considerable riches (a $35 billion cash pile) to make those cars even better. It's giving them an extreme style makeover, rolling out its funky Scion line to —the kids of America and working to put a hybrid in every driveway just as gas prices soar to record levels. The spending spree is already paying off: for the first time, Toyota is the No. 1 car that consumers intend to buy next, rather than Chevy or Ford, according to a recent survey by AutoPacific Group in L.A. Last year Toyota surpassed Ford to become the world's second largest automaker. Industry experts predict it will overtake GM by 2008. "Toyota," says veteran analyst Maryann Keller, "is moving in for the kill."

So when did Toyota take off the kid driving gloves? It began a decade ago, when its then president, Hiroshi Okuda, did the unthinkable: he went public with ambitious plans to first capture 10 percent of the global auto market and then, by 2010, 15 percent (ahem, the amount GM now controls). In 2000 Toyota began selling more cars in America than at home in Japan, and the United States emerged as the most important market in its quest for global automotive domination. Since then Toyota has taken on a bolder, American attitude. When NEWSWEEK recently asked Toyota senior exec and former U.S. chief Yoshimi Inaba why the company needs seventh and eighth auto-assembly plants in America, he laughed and boasted: "We may need a ninth or 10th." Honda was actually the first Japanese carmaker to open a U.S. factory, and its Accord was once America's favorite car. But now Toyota builds more models in America than any foreign automaker, and has the top-selling car (the Camry) and the No. 1 hybrid (the Prius). "They're very aggressive," says GM VP Mark LaNeve. "I truly see us as the underdog now. In my mind, they're No. 1 and we're No. 2."

The Prius tested Toyota's new tolerance for risk. In the late '90s, Okuda greenlighted the foray into gas-electric hybrids at a time when pump prices were hitting record lows and America was falling for SUVs. "With the Prius, we weren't 100 percent sure," admits Inaba. Detroit was sure, though, that Americans would never get behind the wheel of Toyota's geeky science experiment. But today the Prius outsells GM's new Pontiac G6 (the Oprah car), and Toyota is rolling out hybrids throughout its lineup, starting with two SUVs this year and the Lexus GS and the Camry next year. "In 30 years," says Press, "everything will be hybrid." Tom French can't wait to put an end to $50 fill-ups in his GMC Envoy. This summer, he'll replace his guzzler with a Toyota Highlander hybrid SUV that gets 30mpg. "I'd rather buy American. But this is like when the Japanese came out with small cars and Detroit was late responding," says French, 56, who works for a defense contractor once owned by GM. "Now with hybrids, Detroit might never catch up."

Hybrids were hard, but creating Scion was like a personality transplant for Toyota. Long before "Pimp My Ride" took hip-hop car culture mainstream, a small band of U.S. Toyota execs shocked the brass in Japan by proposing a $1 billion bet on a new line of funky lowriders aimed at urban youth. Never mind the investment—Toyota's traditionalists were horrified by Scion's research methods. "When they heard we were talking to hip-hop artists," recalls Scion's first chief, Jim Farley, "they said, 'Isn't that drug dealers and the gang culture?' " But after failing to sell its conservative cars to Gen Y, Toyota took a chance on Scion, though a cautious one. Rather than set up a new network of dealers, the carmaker introduced Scion into its Toyota showrooms in California in 2003 before rolling it out nationwide last year. The calculated risk paid off: last year, Scion's sales shot 25 percent past Toyota's expectations, and this year it's selling more than twice as much as GM's Hummer and Saab brands combined. Best of all, Scion's hip-hop style attracts the youngest buyers in the business. "A Toyota Camry just wasn't an option," says Chris Mrosla, 30, who just bought a $14,500 Scion xB. "But the Scion is a cool little car. It looks like an ice-cream truck."

Scion's success is "instituting disruption" throughout the company, says Farley. That's why, even though Lexus is America's top-selling luxury line, Toyota is overhauling its styling in the image of a Formula One racer. And that's why Toyota will start building a steroidal pickup truck next year at a new factory in Texas, where "imports" don't typically receive a warm welcome. "You often feel like there's a sense of crisis here," says Inaba, "which is healthy." And increasingly, the voices agitating at Toyota have an American accent. To hear them more clearly, the company just installed U.N.-style translation booths in the boardroom of its new Nagoya headquarters. "Now us non-Japanese can fully participate," says Press. "Ten years ago, that never would have happened."

Back when sledgehammers were swinging in Motown, many still equated GM's prosperity with America's well-being. But with a new automotive order emerging, it may not be long before someone in Washington—or even Detroit—observes: "What's good for Toyota is good for America."

http://www.msnbc.msn.com/id/7528898/site/newsweek/

GFerg

What I find very fnny and interesting about this article is that they stated that the Pruis outsells the brand new Pontiac G6. Thats got to really hurt GM right about now.

Faraaz23

Haha, oh man, I love Toyota. Now they're looking to set-up shop bigtime in the heart of motor city.

One thing that I'm wondering though... correct me if I was wrong, but I was always under the assumption that the Toyota facilities in the US were non-union places. Would setting up facilities in Michigan change that? I remember in my HR class talking about how a facility becomes unionized, and it just looks as if they have enough Michigan locals working there (who are very used to being in a union), they could end up having a vote and instating a Union there. The reason I bring this up is, one time on this site I read an article where a Toyota exec (i believe at their Kentucky plant) talks about how their factories not being non-union allows them much more freedom of operation.

Iceman

That's a great article. Very well-written.

For one thing, it's the first time I've seen a quote from a senior American car exec expressing anything but disdain and dismissal of the Japanese automakers. It's also interesting to see the governor of Michigan talking about survival of the fittest, clearly implying that her home-grown consitituency is NOT the fittest.

The more I hear about Toyota as a company, the more impressed I become. Even though they are clearly on a growth trajectory, they still maintain that internal sense of urgency that things MUST be improved. They take chances where warranted (hybrids, Scion) but hedge their bets with conservatism elsewhere (SUVs, not tinkering too much with the Camry).