OPERATION MANAGEMENT

Case Study of Automobile Industry

General Motors vs Toyota
US vs Japan

Satrio Haryoseno
09/296071/PEK/14677

MASTER OF MANAGEMENT
FACULTY OF ECONOMICS AND BUSINESS
GADJAH MADA UNIVERSITY
YOGYAKARTA
2010

Case Study of Automobile Industry

General Motors vs Toyota
US vs Japan
ABSTRACT
The global automotive industry is one of the largest industries in the world and one of the prime
drivers of international economic development and social improvement too. It manufacturers
around 65 million cars and trucks a year, and employs millions of people around the world. The
industry accounts for about 10% of GDP in developed countries.
For the past 20 years, carmakers round the world have been trying to emulate the success of
Japanese carmakers in lean manufacturing. Especially, Toyota has been seen as the benchmark
for ensuring quality and efficiency. Most car factories have now been revamped more or less
along Japanese lines, lessening the gap between Japanese and Western producers.
This paper shows what makes the General Motors became the number 1 automotive industry in
the world and how Toyota could surpassed them.
Toyotas key cultural trait that distinguishes it from other automakers is the Toyota Production
System that ensures Toyotas status as the worlds most efficient automaker and has allowed the
company to expand rapidly into new markets without overreaching. Even before the present
economic slowdown, the US carmakers were losing headway to Japanese rivals because of a
shift in tastes among American motorists from pickup trucus and sports utility vehicles to
smaller, more fuel-efficient cars. Thats why the rapid change in innovation and technology, and
of course the techniques of operations management are so important to keep the companies
sustainable and become the leader in the market.

OVERVIEW
The global automotive industry is one of the largest industries in the world and one of the prime
drivers of international economic development and social improvement too. It manufacturers
around 65 million cars and trucks a year, and employs millions of people around the world. The
industry accounts for about 10% of GDP in developed countries.
A century ago, the industry more or less invented modern industrial capitalism. The history of the
automobile industry goes back to the 1900s, when the industry began to develop in France. But it
was only in the US that automobiles came of age, when Henry Ford innovated the moving
assembly line that marked the birth of mass production in the 1920s. Though GM and Ford had
revolutionised the auto industry through modern car manufacturing in the mid-1920s, Toyota
refined the process in the 1960s with its lean-manufacturing (Just In Time) techniques.
For the past 20 years, carmakers round the world have been trying to emulate the success of
Japanese carmakers in lean manufacturing. Especially, Toyota has been seen as the benchmark
for ensuring quality and efficiency. Most car factories have now been revamped more or less
along Japanese lines, lessening the gap between Japanese and Western producers.
In spite of being over 100 years old and having pioneered the forms and weathered the storms of
20th century capitalism, the industry is still struggling. Graeme Maxton and John Wormald wrote
in their book, Time for a Model Change, It is becoming a sunset industry, a has-been in financial
terms a flagrant contrast with its continuing social role, its share of employment and its
political influence. Average profit margins have declined from around 20% in the 1920s to
around 10% in the 1960s and, to less than 5% now. Even a few carmakers are in losses.
The Big Three: General Motors, Ford and Chrysler have lost a combined $11.3 billion in 2006
and together their US market share has fallen from 72.7% two decades ago to 55.1% in 2006.1
Many analysts expect a further decline for the Detroit carmakers. These three automakers, once
domestic behemoths, are now downsizing themselves. All the three are in various stages of
reorganisation. According to auto industry analysts, GM will be reduced to the size of Ford by
2008 in terms of capacity, and Ford will shrink to Chryslers size. GM and Ford are halving their
workforce and Chrysler is planning to cut costs by $1,000 per unit.
According to analysts, because of the continuous changes in the industry, consolidation has been
taking place almost since its inception. In the late 1920s, there were 270 car companies, mostly
in the US. But, after the Big Three started acquiring the small manufacturers, the number of big
independent manufacturers came down drastically

Research on General Motors

Description of Automobile Industry: Automobile industry is the modern manufacturing industry

including commercial vehicles (CVs), cars, three-wheelers and two-wheelers segments.
The automotive industry has been playing a leading role in spurring growth in economies
throughout the world since the industrial revolution. It is a sector characterized by not only
tremendous potential growth, but also very high profile trade disputes, and intense competition.
In the 21st century, the automotive industry confronts greater challenges as the industry
undergoes fundamental changes.
Research on GM: General Motors is the world's largest automotive corporation (before being
overlapped by Toyota) operating in over 70 countries with a presence in more than 200 countries,
more than 260 major subsidiaries, and a total of 395,000 employees worldwide which translate
into global opportunities that span the planet. Founded in 1908, GM has been the global
automotive sales leader since 1931. GM today has manufacturing operations in 32 countries and
its vehicles are sold in more than 190 countries.
General Motors is involved in Telecommunications, Aerospace, Defense, Financial and
Insurance Services, Locomotives, Automotive Systems and Heavy Duty Automatic
Transmissions. In all GM does, their philanthropy and commitment to the environment in which
they live, is unsurpassed in the industry.

GM Brands: GM's automotive brands are Buick, Cadillac, Chevrolet, GMC, Holden,
HUMMER, Oldsmobile, Opel, Pontiac, Saab, Saturn and Vauxhall. In some countries, the GM
distribution network also markets vehicles manufactured by GM Daewoo, Isuzu, Subaru and
Suzuki.
GM Vision: To be the world leader in transportation products and related services.
In 2002, GM sold more than 8.5 million cars and trucks, nearly 15 percent of the global vehicle
market. GM's global headquarters is at the GM Renaissance Center in Detroit. GM set industry
sales records in the United States, its largest market, for total trucks and sport utility vehicles.
GM became the first manufacturer to sell more than 2.7 million trucks in a calendar year and the
first to sell more than 1.2 million SUVs. GM also increased its market share in the North
America, Asia Pacific and Latin America/Africa/Mid-East regions.

Company Culture of GM GM has defined six core values for the conduct of its business The 6
core values define what GM wants to achieve and what GM wants to stand for as a company.
They are not only the road map for corporate social responsibility: they are the drivers of all their
decisions and activity in all countries. They are, in essence, GM's code of conduct. Every GM
employee around the globe is aware of these six core values.
Integrity: We will stand for honesty and trust in everything we do. We will say what we believe
and do what we say.
Continuous Improvement: We will set ambitious goals, stretch to meet them, and then "raise
the bar" again and again. We believe that everything can be done better, faster and more
effectively in a learning environment.
Customer Enthusiasm: We will dedicate ourselves to products and services that create
enthusiastic customers. No one will be second-guessed for doing the right things for the
customer.
Teamwork: We will win by thinking and acting together as one General Motors team, focused
on global leadership. Our strengths are our highly skilled people and our diversity.
Innovation: We will challenge conventional thinking, explore new technology and implement
new ideas, regardless of their source, faster than the competition.
Individual Respect and Responsibility: We will be respectful of the individuals we work with,
and we will take personal responsibility for our actions and the results of our work.
General Motors is also proud to have played a key role in drafting the Global Sullivan Principles.
These principles serve as a guide for companies of all sizes all over the globe, particularly in

developing countries. The focus is respect for employees as well as health, safety, and dignity.
By endorsing them, companies become a model for other companies in each country to follow.
In May 1999, GM announced its support of the Global Sullivan Principles as being consistent
with GM's internal policies and principles, including its Winning With Integrity guidelines. The
Global Sullivan Principles, which were developed by the Reverend Leon H. Sullivan and have
their roots in the 1977 Sullivan Principles for South Africa, provide guidance to companies
across the globe regarding core issues such as human rights, worker rights, the environment,
community relations, supplier relations and fair competition.
GM Training GM believes in investing in its employees. As a result, GM offers a variety of
continuing education opportunities to further your career.
The formal training program consists of five components, of which the first three are available
through GM University, which is one of the largest corporate educational programs in the world.
General Motor has established a learning organization and cultural for its employees across the
entire enterprise. Called GM University, it's designed to align the company's training investment
with its business needs, and disseminate best practices and core value.
1.
2.
3.
4.

Foundation skill training (i.e. computer software, GM history and business orientation)
Functional specific skills and techniques
Leadership and professional development
On-the-job training within each department

In addition, GM supports advanced education and certification through tuition assistance,

Cardean e-MBA program, and technical education programs.
New Hire Mentoring - GM New Hire (GMNH) is the unique support system for new GM team
members. Simply put, GM new hires are paired with our experienced GM team members with
the primary objective of professionally transitioning and developing new hires into the GM
culture. Providing and enabling them to experience professional growth, corporate culture, new
ideas and perspectives, while driving for business results. Mentoring is critical as move into the
future. The new hires of today, will be our leaders for tomorrow.
Accomplishments over the Years of GM
1920s: First anti-knock gasoline additives - led to high-performance fuels
1930s: First non-flammable, low-pressure refrigerants, which made vehicle and home
refrigerators practical
1940s: First high-compression, internal-combustion engines

1950s: America's first turbine-powered car; forerunner of present-day computer operating

systems 1960s: Pioneering work on experimental powerplants: gas turbines, steam, free piston,
and Stirling engines; electric drive; and hybrids; first comprehensive data on human injury
tolerance
1970s: Zirconia exhaust gas sensor - led to the successful use of three-way catalysts; pioneering
work on atmospheric chemistry; first computer simulation of an automobile crash
1980s: Magnequench rare-earth permanent magnets; industry-leading computer vision systems
for manufacturing; computer-based structural and acoustic analysis for vehicle design
1990s: Integrated chassis control; series of modern experimental vehicles: advanced electric,
diesel-electric hybrid, turbine-electric hybrid, compressed natural gas-fueled and fuel cellelectric vehicles; Partnership for a New Generation of Vehicles (PNGV); magneto-rheological
fluids; Adaptive MagnaSteer Variable-Effort Steering The Cultural Revolution in the
Marketplace The concept of marketing has been changing from products-oriented to customeroriented over the years. In the traditional automobile industry, the important part is machine
process, but nowadays, the high technology creates more and more added values for automobile
products.
Establishment of General Motors diversity and related corporate initiatives is a key business
consideration, as GM leads a corporate-wide cultural revolution. GM Chairman, Jack Smith, is
emphasizing four goals--globalization, growth, lean manufacturing, and using common practices
wherever possible.
Reclaiming a 'Position of Excellence' Customer enthusiasm is General Motors' overarching goal
and is the road to reclaiming a position of excellence in the marketplace. Establishing that
perception is not an easy task, but the right mix of technology and a diverse work force has
produced corporate agility and an aggressively managed corporation. General Motors is
executing a complex counter-offensive to enhance its corporate brand image as an umbrella for
its divisional and vehicle brands.
General Motors is moving aggressively to make its toughest sale of all -- itself, by intensifying
the way it markets its divisional and vehicle brands to customers. Traditionally, GM has
emphasized its individual brands, but has also taught customers those brands come from General
Motors. Although GM was there, it was in the background. Now, the corporate brand push
proclaims GM's quality, safety, and innovations, before directing customers to the individual car
divisions they have known for decades.
Cultural Revolution
GM's setback in the early '90s led to a still unfolding cultural revolution in which senior
executive encourage risk-taking and open debate in the name of selling more cars and trucks to a

diverse customer group. As a result, the recently adopted brand management structure identifies
diverse markets with high sales potential for specific brands and develops strategies to focus
those brands against those markets. These highly focused brands, including the "all new" Pontiac
Grand Prix, Chevrolet Malibu, Oldsmobile Intrigue, Cadillac Catera, Buick Century, and GMC
Yukon are being received enthusiastically by the marketplace.
Developing Effective Strategies
Changing buyer demographics drives General Motors efforts in identifying new non-traditional
ways to reach different customer groups. As a result, GM's fresh image is starting to emerge on a
variety of fronts and with a series of alliances aimed at rebuilding the corporate brand image in
highly targeted activities. GM is striving to connect with customers in a variety of promotions
and venues. For an example, the exclusive automotive sponsorship of the WNBA, the
professional women's basketball league formed by the NBA, is a powerful way to connect with
women and crystallize a new type of relationship. GM's sponsorship of the basketball league will
likely be joined with Concept Cure, GM's partnership with the fashion industry that has risen
over $700,000 toward the fight against breast cancer. In this way, GM will continue to reach
women through causes that matter to them.
In an intensely competitive market, GM leads a cultural revolution to reclaim a "position of
excellence." Our goal is to reach every customer on their terms and provide them reasons to buy
their next car or truck from General Motors.
GM's sustainable development efforts are focused on four areas:
Products - Work includes using advanced technology to develop vehicles with cleaner
emissions and better fuel economy.
Plants - GM has reduced pollution from its North American manufacturing operations by 24
percent over the last two years.
Partnerships - General Motors is co-chairing a research project which studies sustained
mobility needs and methods of transportation, as well as future land transportation systems. The
World Business Council on Sustainable Development coordinates the three-year project.
People - The strongest asset of GM, well-trained and competent employees are essential to
sustainable development. "We strive to have the best-trained environmental engineers in the
world" For industrial companies, 'sustainable balance' is a term loaded with vast complexities,
emotions and implications as we struggle with the balance between our growing global economy
and our basic human needs, "General Motors understands the issues surrounding sustainability
and is actively engaged at all levels of the company to create the balance between sustained
economic and environmental needs. Not only do we see the moral issue, we agree that the
economic upside to sustainability is considerable,"

"Sustainabillity is a balance of environmental, social and economic objectives, how that balance
is achieved will change from time to time as the make-up of the objectives change. But we
people must maintain the equilibrium." Dealer Network -- The Key to Success For nearly three
decades, General Motors has been committed to growing a diverse and financially successful
dealer network. GM was the first U. S. automaker to institute a structured minority dealer
initiative in the industry.
By today's standards, minority-owned dealerships are becoming more prominent. The path,
however, was completely uncharted for those early pioneers who faced incredible odds in
obtaining a retail automotive dealership. Those pioneers found that owning a piece of the
"American Dream" and running it successfully presented an even greater challenge than
imagined but it laid the groundwork allowing us to realize the significant growth today.
Since 1972, GM has provided industry leading training opportunities to qualified minorities to
help prepare them to become future dealers and to help them succeed once they become dealers.
GM has increased the number of minority-owned dealerships to the highest number since the
program began. Today, of the 332 minority dealerships GM includes in its ranks, nearly 70
percent own their dealerships outright.
As significant, GM has dramatically improved the quality of dealership opportunities. The
selection process for identifying new dealerships has been standardized, and factors such as size,
location, demographics, complexity of operations and investment are considered when matching
candidates to dealerships. The result is that new minority-owned dealerships are more profitable
than ever before.
The result is a "win-win" combination for everyone because managing dealer diversity increases
opportunities for others while strengthening GM's competitive global advantage.
Competition
Competing All Over The World In Europe, America and Japan the three developed areas, the
automotive leaders like GM, Ford, Fiat, Volkswagen, Honda, Toyota, etc...not only try for keep
their market share domestically and occupy as much as the market as they can, but also at the
same time compete with emerging countries like Korea and Mexico at lower price products. In
dealing with new growing markets like Asia-Pacific, East Europe and South America, those
leading companies actively start to look for collaboration with local national industries while
they still have to compete for more market share. They are like to abandon the traditional way
which is to transfer outdated automobile to developing countries' markets, instead of that,
exporting new technology and new concept automobiles to improve the local level of car
industry become a mission statement of those who are leading the automotive industry
localization. Besides that, the impact from developing economic countries on medium or lower
price products can become a positive influence to the world leaders. Although it is impossible to
avoid the multilevel structure of world auto industry, up to date, US, Japan, Germany, Italy and

France are still playing important roles with their competitive strength and advanced
technologies.
In competing with other automotive giants all over the world, GM has many competitive
advantages: Across five continents, seven oceans, and twenty-four time zones, General Motors
operates twenty-four hours a day building transportation for the world. This means the global
opportunities at GM for talented people are as wide as the world. From the design and
engineering of new state-of-the-art plants in Argentina and China, to developing new marketing
programs for all of Europe, you can go as far as your hard work and determination will take you.
Throughout North America, GM builds, designs and markets some of the worlds most famous
and most successful automotive nameplates.
International operations in Europe, Asia Pacific, Latin America, Africa and the Mid-East build
and market vehicles under the Holden, Isuzu, Opel, Saab, Subaru, Suzuki and Vauxhall brands.
GM operates one of the world's largest and most successful financial services companies,
offering a variety of automotive financing and home mortgage services. GM produces advancedtechnology electronics systems, products and services for the world's telecommunications,
automotive electronics, aerospace and defense industries.
Trend of Automobile Industry Worldwide Overtime Cooperation and acquisition the international
merger and acquisition in automotive industry has never stopped since a long time. All big
companies have been trying for approaching their objectives by dedicating on competitive
strength and taking out or merging competitors. In the late 20th century, there was powerful
strength among those leading companies, the concept of competition changed in some ways. The
main objectives are not to beat their competitors, but to collaborate in order to share a high
expense on the new technology research of high-tech automobiles, thereby to minimize the risk
of independent development.
Partnerships: GM's global partnerships include product, power train and purchasing
collaborations with Fuji Heavy Industries Ltd., Isuzu Motors Ltd. and Suzuki Motor Corp. of
Japan, and Fiat Auto Spa of Italy. GM, Suzuki and China's Shanghai Automotive Industry Corp.
are partners in GM Daewoo Auto & Technology Co. of South Korea. GM also has technology
collaborations with Toyota Motor Corp. and Honda Motor Co. of Japan, and vehicle
manufacturing ventures with Toyota and Renault SA of France.
Partnership timetable:
1993: GM, Ford, and the then-Chrysler Corporation enter into an agreement with U.S.
government to develop a production prototype vehicle by 2004 that gets up to 80 mpg while
maintaining today's affordability and features. The program is called the Partnership for a New

Generation of Vehicles. GM unveils its PNGV prototype, the Precept at the North American
International Auto Show in January, 2000.
1994: The Coalition for Environmentally Responsible Economies (CERES) and GM mutually
endorse each others' Environmental Principles. GM is the first Fortune 50 Company to endorse
the CERES Principles. That same year, GM is the first automobile manufacturer to join CERES.
1994: GM and The Nature Conservancy sign commitment to work together on sustainability
programs and initiatives.
1994: GM joins the President's Council for Sustainable Development
1997: GM forms a Supplier Environmental Advisory Council to ensure environmental
awareness, pollution prevention and compliance from its suppliers
1999: GM & Toyota announce a 5-year collaboration to speed development of advanced
technology vehicles manufacturing and assembling modularization. Modularization is a
systematical integration of automobiles' accessories or sub-system according to its structural
organization. Manufacturing & assembling modularization is that automotive accessories
manufactures produce modularized systematical products, and then the car producers will
finalize automobiles by simply assembling those modularized products. M & A modularization
will lead to a great transform in car producing mode, this also includes discarding the traditional
assembling lines and equipments, so as to reducing the amount of car accessories, cutting down
the cost of management and operation, and improve the reliability of the products.

Car companies nowadays have many possibilities for sourcing raw materials, parts, and
components, and assembling them into final goods to serve world-wide markets.
GM parts and accessories are sold under the GM, GM Goodwrench and ACDelco brands through
GM Service and Parts Operations. GM vehicle engines and transmissions are marketed through
GM Powertrain.
Environmental Auto-products protecting environment and developing persistently are being
realized and taken into account by more and more countries. The 21st century products will try
for present a harmony between automobiles and our environment by developing new power,
choosing raw materials, producing modularized accessories, and finalizing a whole car. In order
to reach the standard and to save natural resources, new type of cars that are using electric,
hydrogen and mixed power in the future will be well concerned. Meanwhile, some advanced
designing concepts such as green design and whole life design are widely used.
Almost 10 years ago, GM reaffirmed their long commitment to the environment with the
adoption by the GM Board of Directors of environmental principles. These apply to their

operations worldwide. They cover a number of areas: Environmental preservation and

restoration Reducing waste and pollutants Conserving resources Working with governmental
entities for development of sound environmental regulations And assessing the impact of plants
and products in the communities in which we live and work.
GM is committed to environmental preservation and restoration. However, GM believes both the
economy and the environment can flourish. And that belief is being embraced more widely.
GM Environmental Principles General Motors Board of Directors adopted the Environmental
Principles on March 4, 1991. They are intended to serve as a guide for all GM employees
worldwide, encouraging environmental consciousness in both daily conduct and in the planning
of future products and programs.
As a responsible corporate citizen, General Motors is dedicated to protecting human health,
natural resources, and the global environment. This dedication reaches further than compliance
with the law to encompass the integration of sound environmental practices into our business
decisions.
GM Research Leadership:
In 1955, GM became the first auto company to begin conducting atmospheric research.
In 1962, GM became the first auto company to construct a smog chamber for analyzing the
content and effects of smog.
Also in 1962, GM became the first auto company to build a mobile laboratory to sample air
pollutants.
1967: GM developed the industry's first sealed enclosure (SHED) test technique for measuring
evaporative emissions. This technology was later adopted by the U.S. Environmental Protection
Agency (U.S. EPA) as its official test for evaporative emissions.
GM was the first auto company to set up emission research laboratories in the two areas of the
U.S. with the most severe pollution problems (at the time): Los Angeles and Denver.
Unleaded Gasoline:
In 1970, GM became the first auto company to announce that it would manufacture all of its
passenger cars and light trucks in the U.S. to run on unleaded fuel.
Reformulated Gasoline:
GM proposed the idea of reformulated gasoline, which burns cleaner than traditional unleaded
gasoline, in 1989.

1989: GM leads the formation of the Auto-Oil Air Quality improvement research program
which led to cleaner reformulated gasoline In March 1991, GM endorsed the use of
reformulated gasoline in all of its vehicles.
Electric-powered Vehicles:
In 1990, GM announced the development of the Impact (EV1), the first zero-emissions vehicle
to be developed for commercial production in the U.S.
*In 1996, GM was first to market an electric vehicle, the EV1, available for lease in selected
markets.
Variable-fueled Vehicles (FFVs):
1991: The Chevrolet Lumina flexible fuel vehicle (FFV) is the first methanol FFV certified by
the U.S. EPA FFV's operate on 85 percent methanol, ethanol, or gasoline, or any mixture of
them.
Elimination of Chlorofluorocarbons (CFCs):
GM spearheaded the auto industry's efforts to phase out the use of CFCs, which have been
proven to damage the earth's ozone layer.
In 1990, all GM dealerships, assembly plants, and fleet garages in the U.S. and all dealers in
Europe which service conditioning units were equipped with machines that recover AND recycle
CFCs used in air conditioning.
Waste Reduction (Plants):
In 1991, GM and the United Auto Workers (UAW) jointly implemented a program called "WE
CARE" (Waste Elimination and Cost Awareness Rewards Everyone), with focus on prevention
and elimination of potential waste before it becomes a matter of recycling, treatment, or disposal.
GM's vehicle manufacturing and assembly complex in Ramos Arizpe, Mexico, was the first
plant in the world to use a system of microbiological filtering to treat both industrial and sanitary
wastewater.
Recycling:
In 1970, GM conducted the industry's first pilot test program for the collection and recycling of
abandoned cars in rural areas and small communities.
In 1979, GM Europe's Opel subsidiary became the first auto manufacturer in Europe to mark all
its plastic parts with internationally standardized material codes.

In 1990, GM became the first auto manufacturer to enter the engine remanufacturing business.
In this venture, recycled used engines are remanufactured for sale through the GM Service Parts
Operations (SPO) unit.
In 1990, GM's Saturn division was the first to employ the lost-foam casting process for engine
manufacturing, a process which results in a significant reduction in the amount of contaminated
waste sand generated in the molding process. The lost-foam casting process is also used on the
new L850 twin-cam four cylinder engine that is standard on the new Saturn L-series midsize
sedan and wagon (create link).
In 1990, GM Europe's Opel subsidiary was the first German manufacturer to use recycled
plastics in its Calibra model.
In 1991, Opel announced that the 1992 Astra sold in Germany would be the first vehicle on the
market with a guarantee that the vehicle will be taken back free of charge for recycling at the end
of its life cycle.
1995: GM publishes first industry paper on calculating recycle ability of automobiles
Automotive technology digitization. Automotive industry is adapting the future demand of
digitization and intelligentzing. Multimedia system, auto intellectual security system, comfort
management system, phonetic identify system and multi-digital technology will be applied.
Digitization technology will change automobiles design, development and manufacturing
methods, for example, computer virtual design technology conducts new model testing under a
virtual environment; new facilities and assembling lines will be created under the virtual
technology, consequently, producing process will become controllable and precise, target cost
will be rigidly navigated.
GM to offer XM satellite radio in most 2004 model lines General Motors is to widen the number
of vehicles on which it offers XM Satellite Radio as a factory-installed option from 25 in the
2003 model year to 44 for the 2004 model year, more than three-quarters of its entire fleet of
cars, trucks, minivans and sport utility vehicles. Satellite radio, offered by XM and its rival
Sirius, offers coast-to-coast listening of mostly commercial-free programmes with a sound
quality claimed to be superior to FM. The fledgling services are, however, about to face new
competition from digital radio broadcasting which gives car buyers yet another in-car
entertainment choice.
Service Innovation
The competition among auto industry runs like a battle, at the same time when each individual
car maker endeavor to lower cost, increase profit and develop new technology, they also come to
start on a brand new concept of marketing and service. The four corners service and the ceaseless
innovation has become a secret weapon to win target customers and competitive initiation, and it

will make car service the most active one among the 3rd industry, and will as well direct the car
service into individuation, systematization, intelligentizing and low cost.
GM operates one of the world's largest and most successful financial services companies,
GMAC, which offers automotive, mortgage and business financing and insurance services to
customers worldwide. GM's OnStar is the industry leader in vehicle safety, security and
information services. GM's other major businesses are Hughes Electronics Corp., which provides
digital television entertainment and satellite-based services, and GM Electro-Motive Division,
which manufactures diesel-electric locomotives and commercial diesel engines.
GM offers two new credit cards to boost sales GM teamed with Chase Manhattan Bank, a unit of
J.P. Morgan Chase & Co. Inc., for the GM Business Card, and with Household International Inc.,
a unit of HSBC Holdings Plc, for the GM Extended Family Card.
General Motors planned to offer two new credit cards; this is to reward users with discounts on
new GM vehicles. The new cards do not have limits on how much a holder can earn each year or
apply toward a new vehicle. The GM Business Card will be available immediately, and could
generate as many as 100,000 new accounts in the short term and few thousand vehicle sales this
year.
The vehicle manufacturers use Internet to manage sales E-commerce is having profound effects
on the car industry. Consumers use the Internet to become better informed before making a
purchase. Online sites like Autobytel steer millions of car buyers toward specific dealers while
the same sites deliver competing bids for cars, insurance and financing in a manner that lowers
costs and improves satisfaction among consumers. Meanwhile, auto makers are using the latest
in e-commerce methods to manage their supply chains and replenish their inventories. All of big
car company have their own web site to sell cars.
Current Status of The Overall Industry
The automobile industry is evolving rapidly on a worldwide basis. Manufacturers are merging,
component design and manufacture are now frequently outsourced instead of being created inhouse, brands are changing and the giant auto makers are expanding deeper into providing
financial services to car buyers. Meanwhile, all of the biggest, most successful firms have
become totally global in nature.
At the early age of 21st century, the world automobile market will present its newer
characteristics with the development of world automobile industry and the world economy; the
automobile market will be formed into a fresh structure, North America, West Europe and Japan,
the 3 major markets penetrate interactively to seek upgrade. North America, West Europe and
Japan are the three most developed economic areas which hold the largest automobile sales and
capacity in the world. Due to their early market economy taking off, mature market growing,
plus the three traditional markets will have to penetrate interactively.

Increased trade liberalization will certainly spark the growth of automotive industry particularly
in Asia Pacific region, which is critical to future growth of the worldwide auto industry. China's
accession into WTO and the implementation of AFTA will definitely intensify the competition
amongst the players in this industry. The growth in car population and the automotive
manufacturing industry will also stimulate the growth of automotive components and accessories
exponentially. Generally, automakers are optimistic about the future opportunities in Asia Pacific
and anticipate that, by the year 2006, vehicle sales in Asia Pacific will grow at a rate greater than
that of Europe and North America combined and it is expected that over the next decade, the
Asia-Pacific is the region with the highest growth potential and it will remain the most attractive
auto market in the world for the long term.
China centered Asia Pacific, South America and East Europe, the demand for emerging
economic areas increase rapidly. With the economy's continuous developing to Asia-Pacific,
South America and East Europe, these 3 areas are growing into big important emerging
economic markets. The big 5 car producing countries in the world, US, Japan, Germany, France,
Italy all come to look for opportunities of cooperation, invest or establish car plants, and excel
selling systems and service networks. Among those developing countries, China is becoming a
powerful economy at its fast speed, the auto market is just at the prophase of the stage especially
cars (home use), a tremendous potential will turn into an actual demand. Up to date, all big auto
companies world based have found a way to work together with Chinese car companies.
Now, GM is a major player in China's growing automotive market. It has about 8.6 per cent of
china's passenger car market, which will total about 1.1m vehicles in 2002. And it also has more
than 3,800 employees, three joint ventures and two wholly owned enterprises in China. Those
achievements in China market show that GM had a successful strategy in global expending. They
found a new target market, China car market, which has the largest potential in the world.
China, with its population of 1.2 billion people, abundance of natural resources and growing
economic vitality, its increasing importance in today's global economy cannot be ignored. From a
commercial perspective, China represents an important emerging market for a vast array of
products and services. In the case of motor vehicles, China is still a small part of the world
vehicle market (about 7%), but it is projected to account for 25% of the increase in new global
vehicle demand over the next decade. Therefore, influence by prosperous economic
environment, China is becoming a new attractive target market for automakers throughout the
globe.
GM develops rapidly in China market. In 2002, sales are up more than 40 per cent compared
with 2001.The rapid growth in Chinese sales shows that GM do business very well in China, like
the chairman of GM, Mr. Murtaugh said, "We are already maxed out on our capacity. We have
achieved in five years what a lot of people, a lot of very smart people, thought would take 10 to
15 years." GM did a series of positive activities to adapt and hold china car market. In 1997, GM
has a fifty-fifty joint venture automobile company, with Shanghai Automotive Industry

Corporation (SAIC), built Shanghai GM (SGM)'s plant, which consists of vehicle, engine, and
transmission assembly operations, as well as a marketing and administration headquarters. Total
investment is about US$1.5 billion. It has an annual capacity through its two shifts a day of
100,000 cars, a number that the company has already exceeded in sales in 2002.
Products manufactured at SGM include a family of four mid-sized sedans, based on the Buick
Regal and Century built in the US; the Buick GL8 executive wagon, also based on a van built in
the US; and, the Buick Sail, a compact car based on the Opel Corsa, originally designed and built
in Europe. The Sail is China's first compact car intended for the growing middle class.
In cooperation with Chinese partner in SGM, GM established the Pan Asia Technical Automotive
Center in 1997. This is a US$50 million investment that provides automotive engineering
services for its parent companies and other automotive companies not only in China but the AsiaPacific region. These services include design, development, testing and validation of components
and vehicles.
The cooperation with Chinese partner help GM developed in China quickly and steadily,
especially in technology development. GM also helped China development in other social field.
GM established several partnerships and initiatives in China that create benefits beyond those of
their direct business. For example, GM has been an active partner with the Chinese government
in addressing current and emerging environmental challenges. This includes a joint research
project with the Chinese and US environmental protection agencies to sample air quality and
determine primary sources of pollution. In this vein, GM has taken a lead role in advocating the
benefits and use of unleaded fuel in China.
GM has also partnered with the Chinese regulatory and safety community on research and
development of safety and health standards to ensure that the best available technology is used.
Furthermore, GM has sponsored more than a dozen study trips to the US by Chinese government
officials on matters of health, safety, and the environment.
GM is a geocentric automotive company, all of these decisions and activities in China car market
show that GM thinks globally and acts locally, these positive activities lead GM adapt and hold
China car market quickly.
But now GM face very huge threat from Toyota and Volkswagen. According to Bloomberg,
2010, China risks overcapacity because of Toyota and Volkswagen growth in there.
Toyota Motor Corp., Volkswagen AG and Nissan Motor Co. are raising production capacity and
sales forecasts in China, betting vehicle demand will continue to grow even if the government
scraps car-buying incentives.
Volkswagen, the biggest foreign carmaker in China, will invest 4.4 billion euros ($5.9 billion) in
plants and new models by 2012, while Nissan aims to boost capacity in the nation almost 70

percent, the companies said April 23 at the Beijing Auto Show. Toyota and Hyundai Motor Co.
are also building new factories in China, the worlds largest vehicle market.
The automakers are competing for market share as Volkswagen estimates the growing wealth of
Chinas 1.37 billion people may raise the nations auto demand as much as 20 percent this year.
Nissan predicts growth may slow next year as China has signaled it may end a tax break for
small cars, and industry consultants JD Power & Associates and IHS Global Insight say
carmakers risk building too many plants.
Chinas motorization is reaching the masses, said Takanobu Ito, Chief Executive Officer of
Honda Motor Co., Japans second-largest carmaker. Even after the tax break ends, demand
shouldnt drop very much.
Chinas vehicle sales growth this year will exceed Hondas original estimate of 10 percent, Ito
said at the auto show. Xu Changming, a research director at Chinas State Information Center,
said last week demand may rise about 17 percent to 16 million vehicles, down from 46 percent
last year.
Tax Break in China
The government is likely to raise consumption tax to 10 percent next year for cars with engines
no larger than 1.6 liters, after cutting the rate to 5 percent in 2009 and raising it to 7.5 percent this
year, Xu said. Last years reduction, which helped Chinese auto demand surge past the U.S. for
the first time, resulted in unsustainable growth, he said.
Even if the tax break is phased out, there is a fear that amid all of this investment and stellar
growth, the vehicle market could start to overheat, Paul Newton, a London-based auto analyst at
IHS Global Insight, wrote in a research note last week. The carmakers vying for market share in
China may not want to admit it, but this risk is becoming a very real concern.
GM, Toyota
General Motors Co., the largest automaker in China, plans to increase sales in the nation to 3
million vehicles by 2015 from an estimated 2 million this year. The company and its local
partners sold 1.83 million units in China last year.
Every time the government changes their policy, it will have some impact, Kevin Wale,
president of Detroit-based GMs China business, said at the auto show. But the underlying
demand is increasing at a very fast rate.
At the moment, We dont have enough cars and we cant build enough cars, he said.
Government policy changes are too unpredictable to be reflected in planning, Toyotas Executive
Vice President Takeshi Uchiyamada said at the show.

The speed of changes to government policies is faster than our development of new engines and
new cars, Uchiyamada said. The company, based in Toyota City, Japan, is basing its strategy on
significantly high demand for small-engine compact cars, he said.
Toyotas 2010 sales in China may exceed an 800,000-unit target, said Masahiro Kato, president
of the companys local unit.
A new Toyota plant in Changchun, Jilin province, will start production in late 2011 or early 2012
and have a yearly production capacity of 100,000 vehicles, he said. The new plant will likely
build Corolla vehicles and the automaker may also introduce a new low-cost car in China, Kato
said.
Toyota rose 3.4 percent to close at 3,690 yen in Tokyo trading today, gaining the most in seven
weeks after Nikkei English News reported on April 24 that the company may post a full-year
operating profit.
Also, General Motors and Ford, are facing a long, hard battle for survival tonight after Wall
Street abruptly lost confidence in their financial stability in the face of plummeting vehicle sales.
Research on Toyota
In 1933, Kiichiro Toyoda established an automobile division within an already successful
Japanese company, Toyoda Automatic Loom Works, Ltd., a manufacturer of textile looms. In
1935, Toyota had established its first dealership and produced their first vehicle, the Model G1
truck. In 1937, after many challenges, the division was spun off and became an independent
company within the group and became known as Toyota Motor Corporation (TMC). By 1957,
they had imported their first passenger car from Japan into the United States. In the early to mid60s, Toyota was clearly in the path to becoming a multinational corporation by opening a
vehicle plant in Brazil and their first Asian vehicle plant in Thailand. They first showed their
multinational presence in the United States when Toyota created a joint venture with General
Motors Corp to open their first United States automobile assembly plant. In 2003, they became
the worlds number 2 in terms of annual sales, as they overtook Ford Motor Company and
coming behind General Motor. Today, Toyota has 40 vehicle assembly plants around the world
and 12 research, development and design centers and employs approximately 310,000 personnel.
The history behind the Toyota logo is nothing shy from intriguing. As many have noticed
the obvious image of a T for Toyota, the full meaning behind the logo places the perfect
definition of who Toyota Motor Corporations is. The logo consists of 3 oval rings. Aside from
the letter T that the two perpendicular center ovals represent, it is also a relationship of mutual
trust between the customer and Toyota. The space in the background implies a global expansion
of Toyotas technology and unlimited potential for the future. Therefore, the Toyota logo
portrays the companys vision and philosophy and is known worldwide as being synonymous
with quality, reliability and the spirit of innovation.

Toyota, as well as the entire automobile industry, has their strengths, weaknesses,
opportunities and threats. Below please find a SWOT Analysis for Toyota Motor Corporation.
Strengths

Innovation, advanced technology and their research and development. First to produce a
hybrid automobile (Prius) gaining the attention during a time of high gas prices.

To expand more aggressively into new segments of the market. The launch of Aygo
model by Toyota is intended to take market share in youth market.

To produce cars which are more fuel efficient, have greater performance and less impact
on the environment.

The development of eco friendly vehicles that respond to social and institutional needs
and wants.

Global Expansion; they must continue to penetrate the emerging markets such as India
and China where the demand has increased significantly.
Weaknesses

Japanese car manufacturer, which makes them seen as a foreign importer.

Production capacity; they produce most of their cars in the United States and in Japan
while competitors may be more strategically located worldwide for a competitive global
advantage.

Possible issues with quality due to the numerous recalls that has led to criticism.

Opportunities

Innovation, advanced technology and their research and development. First to produce a
hybrid automobile (Prius) gaining the attention during a time of high gas prices.

To expand more aggressively into new segments of the market. The launch of Aygo
model by Toyota is intended to take market share in youth market.

To produce cars which are more fuel efficient, have greater performance and less impact
on the environment.

The development of eco friendly vehicles that respond to social and institutional needs
and wants.

Global Expansion; they must continue to penetrate the emerging markets such as India
and China where the demand has increased significantly.

Threats

Increased competition and saturation of the market.

Shift in exchange rates that are affecting profits and cost of raw materials.

Recession is here. Household incomes have continued to decrease through these rough
times due to the increased unemployment. This clearly leads to a decrease in sales especially in
the gas guzzling SUVs.

Demographics have shown a decrease in family size throughout time. Therefore, the
need for large vehicles, aside from the gas guzzling issue, has decreased.

Fuel/oil prices have led consumers to use their cars less allowing it to last longer or
choosing not to use/own a car at all.
Toyota creates value to stakeholders in many different ways. TM is focused in delivering
the best customer service possible. They believe that creating an emotional attachment between
the customer and the brand is just as vital in the success of the organization. Innovation has also
been a key player in creating stakeholder value. Toyota hybrid is just one example. They have
answered to stakeholders wants of going green. Consumers who value the clean emissions,
fuel efficiency, safety, comfort and personalized design of such vehicles will eventually pay more
for them as costs for air pollution and climate change rise. The demand for such vehicles played
a major role in Toyota becoming the second largest automobile manufacturing in the world.
Their approach defines innovation as an incremental process rather than making huge, sudden
leaps. They believe in making things better on a daily basis, which is known by its Japanese
name, Kaizen- continuous improvement.
Toyotas key cultural trait that distinguishes it from other automakers is the Toyota
Production System that ensures Toyotas status as the worlds most efficient automaker and has
allowed the company to expand rapidly into new markets without overreaching. One might
argue that this is Toyotas secret weapon! The Companys commitment to teamwork is
exemplified on the factory floor, where workers grab parts from trolleys that move with the line,
one of many timesaving innovations proposed by the workers themselves. Toyotas philosophy
of empowering its workers is the centerpiece of a human resources management system that
fosters creativity, continuous improvement and innovation by encouraging employee
participation and that likewise engenders high levels of employee loyalty. Another Toyota
competitive advantage is their suppliers, as they have and still have tight bonds with them.
Toyota supports its suppliers with business, while suppliers are expected to support its
technology as well as geographic expansion. Their complete dominance of its home market in
Japan also gives them a huge advantage over GM and other competitors. Toyota has a home
market share of 40%, which allows them to count on steady revenue and profits. Toyota is able
to use new technology and roll out vehicles in its home market, then seek additional volume

overseas. The only area that Toyota seems to lag behind in is their expansion into emerging
countries. Toyota must move in aggressive manners into these fast growing markets such as,
China, Russia, Brazil and India in order to remain a top competitor in the industry.
Some of Toyotas initial barriers dealt with World War II. As Japan became embroiled in
the war, the procurement of basic materials for automobile manufacturing became more and
more difficult. At one point, they were manufacturing trucks with no radiator grills, brakes only
on the rear wheels, wooden seats, and a single headlight. Japans economy began to deteriorate
and by the time the war ended in August 1945, most of Japans industrial facilities had been
wrecked and their production plants had suffered extensively. Once their motor industry as a
whole began to recover, concerns concern that American and European auto manufacturers
would overwhelm the Japanese market with their economic and technical superiority. They
overcame this by focusing on small cars since the American manufacturers were concentrating
on medium-sized and larger cars and it proved to be a great decision by Toyota executives in
attempts to not directly compete with the American manufacturers. In 1945, the economy was
still in poor shape and goods and there was a short supply of all goods and materials and inflation
was high. These barriers posed a great threat for Toyota as the new government policy had
discontinued all financing from city banks and the Reconstruction Finance Corporation. Toyota
began facing a sever liquidity crisis that led to employees not being paid at their regular payroll,
which in turn led to a reduction in salaries and the possibility of lay offs. Toyotas Labor Union
went on strike and Toyota was on the brink of bankruptcy. Although Toyota faced several
serious barricades, they were able to overcome all of these factors and become the worlds
largest automaker!
In order for Toyota to continue its growth pattern, they must venture into emerging
countries. Toyota has slowly made there presence known in the so-called BRIC markets (Brazil,
Russia, India and China) however, they still fall well behind General Motors. Other countries
of interest to discus are Turkey and South Africa. While Toyotas North American sales slipped
by 8,000 vehicles on slowing U.S. sales they were able to make up for this decline by strong
sales in China, Africa and South Africa.
Toyota Motor Corporation- 70 year milestones
Year

Milestone

1933 Automobile department established within textile loom maker Toyoda Automatic Loom
Works -- now Toyota Industries Corp -- founded by inventor Sakichi Toyoda
1935 First vehicle, the Model G1 truck, built. First Toyota dealership established
1936

Production starts of its first car, the Model AA

1957

Crown becomes first passenger car made in Japan to be exported to the United States

1962

First overseas vehicle plant, in Brazil

1964

First Asian vehicle plant outside Japan, in Thailand

1972

Cumulative production in Japan reaches 10 million vehicles

1984

Toyota's first U.S. car assembly plant, a joint venture with General Motors Corp, opens in
California

1989

Toyota launches luxury Lexus brand in North America

1992

First European car plant begins production in Britain

1997

Prius, the first mass-produced hybrid car, launched

1998

Toyota takes majority stake in minivehicle maker Daihatsu Motor Co

1999

100 millionth Toyota vehicle produced in Japan

2001

Toyota takes majority stake in truck maker Hino Motors Ltd

2003

Toyota makes 6.78 million vehicles and overtakes Ford Motor Co in annual sales to
become world No.2 behind General Motors

2005

Toyota takes minority stake in Fuji Heavy Industries, maker of Subaru cars, for
cooperation in vehicle technology development and use of its U.S. factory

2006

Toyota takes minority stake in truck maker Isuzu Motors Ltd to beef up diesel engine
technology

2006

Toyota's group global sales of 8.808 million vehicles exceed GM's by 128,000, making it
the world's biggest automaker, authoritative industry magazine Automotive News says.
(This figure excludes cars made by a Chinese joint venture in which GM holds a minority
stake)

Analysis
Why Toyota could surpassed the giant automotives GM?
Toyotas key cultural trait that distinguishes it from other automakers is the Toyota Production
System that ensures Toyotas status as the worlds most efficient automaker and has allowed the
company to expand rapidly into new markets without overreaching. One might argue that this is
Toyotas secret weapon! The Companys commitment to teamwork is exemplified on the factory
floor, where workers grab parts from trolleys that move with the line, one of many timesaving
innovations proposed by the workers themselves. Toyotas philosophy of empowering its
workers is the centerpiece of a human resources management system that fosters creativity,

continuous improvement and innovation by encouraging employee participation and that

likewise engenders high levels of employee loyalty. Another Toyota competitive advantage is
their suppliers, as they have and still have tight bonds with them. Toyota supports its suppliers
with business, while suppliers are expected to support its technology as well as geographic
expansion. Their complete dominance of its home market in Japan also gives them a huge
advantage over GM and other competitors. Toyota has a home market share of 40%, which
allows them to count on steady revenue and profits. Toyota is able to use new technology and
roll out vehicles in its home market, then seek additional volume overseas. The only area that
Toyota seems to lag behind in is their expansion into emerging countries. Toyota must move in
aggressive manners into these fast growing markets such as, China, Russia, Brazil and India in
order to remain a top competitor in the industry.
But now according to the datas above, Toyota try to penetrate the Chinas market and if they
succeed, it will strengthen their position as the number 1 automotive industrys leader in the
world.
Conclusions
Toyotas key cultural trait that distinguishes it from other automakers is the Toyota Production
System that ensures Toyotas status as the worlds most efficient automaker and has allowed the
company to expand rapidly into new markets without overreaching. Even before the present
economic slowdown, the US carmakers were losing headway to Japanese rivals because of a
shift in tastes among American motorists from pickup trucus and sports utility vehicles to
smaller, more fuel-efficient cars. Thats why the rapid change in innovation and technology, and
of course the techniques of operations management are so important to keep the companies
sustainable and become the leader in the market.

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