It didn’t last very long, did it?
Just a few years ago, with the global economy falling fast and General Motors on its way to a government bailout and bankruptcy court, the Toyota Motor Company of Japan overtook GM and became the world’s largest automotive company. That event ended GM’s 77 year run as the king of the hill, a title that it originally wrestled from Ford shortly before the start of the Great Depression.
From the very beginning, Toyota’s grasp on the global crown appeared to be tenuous at best. Volkswagen, for instance, declared itself to be firmly on a trajectory to overtake Toyota within a decade. And over the longer term, nobody was counting out the growth potential of homegrown Chinese automotive companies like Chery and Geely.
But nobody anticipated that Toyota’s reign at the top might only last a few years. And, most certainly, nobody dreamed that the company that would overtake Toyota might be the firm that fell behind it so recently; namely, GM itself.
The Blink of an Eye
We’re only one-third of the way through the year 2011, of course, and so it may be premature to assume that GM will indeed best Toyota this year. Nevertheless, the firms have already locked in their production plans for the next several months; based on their manufacturing capacities and sales trends, it does indeed appear likely that the rivals will trade places at the top of the global industry heap for the second time in four years.
GM’s stock is actually performing in a lackluster manner, but it has managed to refresh its product line and to continue succeeding in high-growth markets like mainland China since emerging from bankruptcy proceedings. Toyota, on the other hand, has staggered from one crisis to another, most recently the great earthquake, tsunami, and nuclear catastrophes that have disrupted supply chains and imperiled energy sources.
The emergence of Asian economic power, of course, is a decades-long phenomenon that began in post-war Japan and later lifted the Asian tiger economies of Hong Kong, Singapore, South Korea, and Taiwan. Although most pundits believe that the Asian region will continue to drive the global economy for decades to come, the rapid shift of financial might from the Land of the Rising Sun to the People’s Republic of China appears to demonstrate that local fortunes can turn in the blink of an eye.
There is a chance, of course, that General Motors, Toyota, and Volkswagen will simply become a trilateral oligopoly based respectively in America, Asia, and Europe, clustered at the top of the global automotive industry and trading places from time to time. This has occurred in other worldwide industries as well; the three major airline alliances Star, SkyTeam, and OneWorld, for instance, each serve every continent and collectively hold close to a 75% market share of the global flight network.
Nevertheless, Toyota’s rapid ascent and subsequently startling decline, when contrasted with the astonishing turnaround of a once-moribund General Motors, are indicators that the industry may be looking forward to a future of unexpected twists and turns. From the emergence of the electric powered car in the West, to the introduction of Tata’s tiny Nano in the East, we have witnessed trends and developments that would have seemed implausible a mere decade ago.
Furthermore, the renewed escalation of energy costs will inevitably encourage entrepreneurs to invent new means of transportation that may assign the gasoline engine to the scrap heap of history. Might not the entire automotive industry, as we now know it, fall into decline if firms like Better Place, Pure Mobility, and Tesla Motors actually succeed in making ecologically efficient transportation alternatives affordable and reliable?
The Arc of History
All of this uncertainty leads one to accept an unescapable conclusion: that, although the long arc of history might lead us in foreseeable directions, it may be impossible to predict the short term fortunes of specific entities. Various American, Asian, and European automotive companies have risen and fallen, and many have risen again. Entire nations, and their national economies, have indeed followed similar paths.
With the Chinese economy on a multi-generational growth tear, the Japanese economy in free fall, and the American economy wallowing in debt, it may be unwise to predict any short-term changes in these trends. And yet many predicted that the Japanese economy would overtake America’s in 1990 when the market capitalization of the Tokyo Stock Exchange overtook the venerable New York Stock Exchange, a condition that permanently reversed itself a year later.
Thus, while General Motors might allow itself to feel a brief glow of satisfaction about its re-emergence as the “top dog” of the global automotive industry, it would be well-advised not to spend too much time looking back over its shoulder. In the words of the immortal Satchel Paige, someone else may be gaining on them.