Just as American automakers were trying to wean themselves off of fleet sales, just as The Big 2.8 were looking to reduce incentives and bounce back from a slow June, July. In July, practically every U.S. economic indicator took a downturn, from housing starts to the stock market. While American auto sales didn't plummet, they took a major hit. Even Toyota was not immune from the fallout; the numbers rolling in proving that ToMoCo's not invulnerable to a bad market. Damage report Spock.

Passenger Cars

After climbing steadily since October of last year, Chevrolet Impala sales sank back down to their pre-sales spurt level, 20 percent below where they were last year. Ford Fusion sales dropped 31 percent from last year. Thanks to robust sales earlier this year, it's still four percent higher year-to-date than last year.  Sales of Chrysler's 300 decreased 15 percent for the month, 14 percent for the year. The Toyota Camry dropped about one percent from July 2006, but it's still up over eight percent year-to-date. None of these models are heavily discounted at the moment; if sales continue to fall, incentives are sure to rise.

Pickup Trucks

Chevrolet Silverado sales rose by about 2K units from June. Comparing July '07 to July ‘06, sales of GM's erstwhile turnaround tiger took a beating, down almost 30 percent. Year-to-date, they shrank by almost seven percent. Perpetually buoyed by incentives, sales of the Dodge Ram pickup fell 10 percent from last July, but less than one percent for the year. Ford isn't offering big incentives on the F-Series ; sales are down 18 percent from last year and 23 percent year-to-date. 

Taking a page from their competitors' playbooks, Toyota continued and even increased incentives on the Tundra . It worked. Tundra sales were up a whopping 125 percent from July of last year and 56 percent year-to-date. Based on the first seven months' sales, Toyota will have no problem reaching their first-year sales goal of 200K new Tundras. Still, it'll be interesting to see if sales drop as they start backing off on the rebates.

Truck-based SUVs

As more drivers make the switch from gas-guzzling trucks to slightly less thirsty CUVs and cute utes, the market for traditional SUVs continues to evaporate. The Chevrolet Tahoe showed a slight increase (500 units) from June, but sales are running 12 percent below last July. Year-to-date, the Tahoe's down 16 percent. 

The Ford Explorer is lost in the wilderness. Sales are down 30 percent month-to-month and 23 percent year-to-date. Ye Olde Dodge Durango took the biggest hit, with July's sales less than half of June's. The Durango took a 26 percent hit both from last July and overall year to date. Toyota 4Runner's sales were actually up a bit from June, but down 29 percent from last July and 21 percent for the year.

CUVs

CUV sales were down– with one surprising exception. After dropping steadily since March, the Chevrolet Equinox enjoyed a 50 percent increase from June. Unfortunately, it's still nowhere near last year's sales levels, dropping 42 percent on the month and 29 percent on the year.

The Ford Escape didn't. It experienced a sharp drop from June's sales. Still sales remain slightly ahead of last year, up two percent for the month and three percent for the year. The Chrysler Pacifica didn't [sea] fare nearly as well. Sales were down from June, from July '06 (35 percent) and year-to-date (25 percent).

Although the redesigned Toyota RAV-4 's sales year-to-date are up 13 percent, they were down almost two percent from last July.

New Models

The brand new models weren't immune to the pressure drop. The Jeep Compass shed about 800 units from June, the GMC Acadia was down 1400 units, and the Ford Edge fell 3000 units. GM has yet to offer incentives on their Lambda CUVs. Ford and Chrysler have small rebates on the compass and Edge. Again, if sales don't pick up, deal sweeteners are a-comin'.

Total Sales

Total vehicle sales in the U.S. market were down in July. Not only were they reduced from June, they were also down from July of last year. Toyota showed a seven percent drop from last July, Chrysler Group dropped eight percent, Ford was down 19 percent and GM was off 22 percent. It's not quite as bad year-to-date. Ford is off 12 percent for the first seven months of the year, GM is down nine percent and Chrysler is only down two percent. Toyota is six percent ahead of last year. 

The Future

Over the past few weeks, Chrysler has announced an extended warranty, GM ramped-up the rebates and Ford is offering low interest rates. It'll be interesting to see if any of this will help sales recover over the next few months, or if the downward spiral will continue.

The contract negotiations between the Detroit automakers and The United Autoworkers Union (UAW) continue apace. The employers are adamant: they need union concessions to survive. BIG concessions. Citing a $25/hour labor cost differential between their operations and those of the transplants, The Big 2.8 claim their salvation depends on taking food from union workers' table negotiating large pay and benefit cuts. But would such concession from the carmakers' "partners" actually bail them out of hot water? 

First, the majority of that disparity comes down to The Big 2.8's retiree overhang. Including workers' spouses, Chrysler pays health care and pensions to 78,435 non-active UAW beneficiaries. Ford pays out to 123,007 off-line union dependents. And GM signs checks to 338,902 non-working union members. Take those numbers out of the equation and the actual direct labor costs between domestic and transplant automakers are roughly comparable.

Second, when it comes to union concessions, what's the big deal? For the sake of argument, let's say the UAW negotiators lose their collective [bargaining] minds and agree to a $20/hour cut. GM has approximately 80K active UAW workers on its payroll. Cutting $20/hour from their union personnel costs will save them $1.6m/hour. Now, let's take that out to a year, based on a 40-hour work week (2,080 hrs/year). In theory, GM would save $3.3b/year. 

Let's also assume GM sets up a union-controlled VEBA for UAW retiree health care. That little item would run anywhere from $30b to $40b. While a UAW VEBA would only require a one-time payment of cash and stock, it would take The General at least ten years to recoup the cost from the resulting savings.

Ford? Same boat. FoMoCo's in hock up to and including their Blue Oval, facing a mountain of long-term debt. Any savings The Blue Oval Boys realize from cutting UAW salaries/benefits might cover their interest payments. Chrysler must fry the same fish.

Detroit must look for more fundamental solutions. The Big 2.8's existing union contracts and a woeful lack of flexible manufacturing capacity make it cheaper to keep a factory turning out cars (and let them pile up on storage lots) than it is to suspend production (and let supply decrease to match diminished demand). The results: excess inventory, fire sales,and continued brand degradation. Union negotiations need to focus on facilitating efficient operations, rather than simply cutting costs.

Meanwhile, the crucial adjustments must come from management. They can try to lay blame wherever they want, but the union didn't approve the lackluster designs that have been rolling out of Detroit for years. The union's not responsible for badge-engineered product planning. The union didn't fill the executive suites with yes men (and women) who will kiss whatever they have to kiss to keep their jobs. And the union had nothing to do with putting beancounters in charge instead of engineers.

Bottom line: labor costs have zero impact on what cars consumers decide to buy. You could argue that an extra grand here and there– taken out of direct costs and plowed back into new vehicles– would make The Big 2.8's vehicles more competitive. Given the failure of heavily discounted domestic product to strike back against the Toyotas of the world, you could make an equally compelling case that lowering the domestics' production costs wouldn't have any impact on the end result and, thus, U.S. consumers' choices.

While Mulally's Ford seems to "get it." GM under Wagoner singularly fails to recognize this simple fact. And Chrysler is now even more of a question mark. Lest we forget, the automakers have been digging themselves into this very deep hole for a very long time. Decades of hit-or-miss product planning, questionable quality, emphasis on quarterly profits instead of long-term results and obscene executive bonuses have all yielded a lineup that can't cut the mustard.

There's only one way to "save" Detroit. American automakers and their unions must set aside their adversarial relationship and find a way to build the world's best cars– price no object. That's right: they must stop focusing on margins and start focusing on market share. Making a small profit on a smaller and smaller slice of the U.S. market will do nothing more than prolong The Big 2.8's agonizing journey on the road to oblivion. They need to recapture the high ground, destroy the transplants' mindspace advantages, restore America's carmaking reputation and THEN think about profits. 

Is there enough time? Probably not. At this point, committing all remaining resources to building the world's best automobiles at any cost is a death or glory strategy that has more than a whiff of the grave to it. But thinking that Detroit's future depends largely on reducing labor costs is the worst kind of self-delusion: the kind without any chance of working. 

The American pickup truck wars have become a series of increasingly pitched battles. Even as the pickup market tanks, the main players have regrouped, refreshed and rejoined the fight. As we await the new Dodge Ram pickup, a major candidate for the "I coulda been a contender" award, questions must be asked. Does the current Ram have what it takes to hold the fort against the [ostensibly] reliable Toyota Tundra, the built-like-a-rock Chevy Silverado and the tough luxury Ford F-150? What battles will the new Dodge Ram have to win?

The Age is reporting two more hoon-related incidents, less than a day after a street race gone bad killed an elderly couple in Sydney, Australia. The first arrest involved two Pulsar hatchbacks racing side-by-side. Police allege that the vehicle on the wrong side of the road in Guildford struck a car making a right hand turn, sending both drivers to hospital. That accident comes hot on the heels of another arrest in St. Marys, where police nabbed two more alleged street racers: a 17-year-old Toyota Camry driver (with two 16-year-old passengers) and a 21-year-old disqualified driver helming a Daihatsu Charade. Police have responded to the hoonage with plenty of tough talk, promising increased retribution. "You have to question whether, as in the case of the United States, the solution to this problem is, in part, the compacting of vehicles into a cube dropped on the front lawn of their homes," Mr Moroney told reporters. "Maybe that's the message that they've got to understand."

As president and CEO of the Alliance of Automobile Manufacturers, representing BMW, DaimlerChrysler, Ford, General Motors, Mazda, Mitsubishi, Porsche, Toyota and Volkswagen, I can speak firsthand about the radical transformation that has been taking place within this global industry. For starters, let me be especially clear on this particular item: automakers support increasing Corporate Average Fuel Economy (CAFE) standards. In fact, today’s auto industry is currently advocating for the largest CAFE increase in U.S. history.

The Alliance supports an unprecedented 30 percent to 40 percent CAFE increase over the next 15 years. We believe it’s time to end the debate. We urge Congress to act now, so we can continue with the hard work needed to further our efforts to improve fuel economy. To find the basis for an argument that the auto industry feels otherwise, one would have to dig pretty deep into the archives.

You’d have to go back further than July 3 of this year. That’s the date the Associated Press first reported that we supported the Hill-Terry Bill (H.R. 2927), which calls for that historic CAFE average increase to 32mpg to 35mpg. This aggressive, but responsible bill currently has more than 120 cosponsors just two weeks after its introduction.

You’d have to go back further than March – that’s when the CEOs of four of our member companies testified before a House Energy and Commerce Subcommittee and pledged to support tough laws to combat global warming. True to our word, we have openly and aggressively supported CAFE legislation that serves both the environment and consumers.

You’d have to go back further than the late 1990s, when we were hard at work designing and engineering the 60 models of Alternative Fuel Automobiles (AFAs) on sale today – a 500 percent increase over the number of models available in 2000. AFAs run on power other than petroleum, and just a few years ago many consumers didn’t know what hybrids, biodiesels and E85 vehicles were.  Today they’re buying them in record numbers.

In fact, to find the basis of Mr. Webber’s arguments [see; below], you would have to stretch all the way back to archives of the 1970s – when many of today’s auto industry leaders were still in college. The fact of the matter is that many of the people featured in those old black and white television clips and the now-yellowed newspaper clippings detailing the debates of the 1970s are no longer even in the auto manufacturing business.

Today’s auto industry is a new industry. Today’s automakers are committed to producing vehicles that use less fuel and meet our consumers’ diverse needs; whether our consumers run a small business and need a pick-up truck, have a large family and want, say, a minivan, or whether they want a small two-door coupe for themselves. Our job is to serve them all.

Transforming an entire industry and adapting to dramatic new CAFE standards takes planning. That’s why lead time is so important. Keep in mind that the cars and light trucks our engineers are working on today won’t be on sales floors until 2014 or later.

That’s how long it takes to coordinate the 3,000 different parts that go into a single vehicle. Or to enhance and refine the approximately 50 prototypes that lead to the production of just a single model.  It’s hard to anticipate consumer trends that far out.

But anticipating consumer trends is essential to CAFE because one of the program’s least-understood aspects is that it’s based on vehicles sold, not vehicles produced. And American consumers for five straight years have chosen light trucks over passenger cars.

To remain viable for our employees, communities and customers, auto companies have to make decisions years in advance based on cold, hard business facts. We cannot turn a blind eye to the laws of economy that apply to virtually every free-market industry in the world: customers rule. 

The cost of new technology cannot exceed what consumers are willing to pay. Sometimes cars that are designed well, built well, test well, marketed well and priced well, still – despite our best efforts – do not sell well.  And when that happens, it’s the auto manufacturers alone that have to absorb the losses and make tough decisions.

For now, the decision we as an industry have made is this: we are transforming automobiles and the fuels that power them. We want consumers, including Mr. Webber, to be are aware of is this. Our companies have evolved as much as our products have. This industry has suppliers in every single state, and our products draw upon technology developed around the world.

Mr. Webber’s column asks why opposition to higher fuel economy makes sense. On behalf of this industry, let me say that it doesn’t make sense. That’s why we’re not doing it. We support increased CAFE standards and stand ready to continue the hard work of getting the job done.  

[This article was written in response to a USA Today editorial "What are the Dinosaurs of Detroit thinking?" by Alan M. Webber. USA Today declined to run this rebuttal.]

According to Mike Levine at Pickuptruck.com, the all-new Toyota Tundra has surpassed the new(ish) GMT900 GMC Sierra 1500 in year-to-date sales. Officially, GM claims to have sold 115,185 Sierras. However, there's a bit of cloak and dagger math here. This figure includes 2006 models, and 'Sierra Classics', both built on the GMT800 platform, as well as heavy duty models. After peeling back these layers of confusion and misdirection, Mr. Levine reckons GM has sold only 76,700 brand new(ish) GMT900 Sierras. Toyota on the other hand has sold 97,290 (not quite fully) box(ed) fresh Tundras. This puts the Tundra at number four in full sized truck sales, and marks the first time a foreign automaker has sold more trucks than a domestic— in the history of the world, ever. If current sales trends continue, the Tundra will pass the Sierra in gross sales (i.e. with GM's gorilla math) by October. Currently GM gives up to $2000 in rebates to its new Sierra customers and Toyota offers up to $2,500. May you tow in interesting times.

Toyota's enjoying record financial prosperity; year-on-year, the world's largest automobile manufucturer's Q2 operating profits rose 31.8 percent (675.43 billion yen vs. 512.42 billion yen). The lion's share of Toyota's success stems from strong U.S. sales of high margin models (Tundra and Lexus LS), bolstered by a weak yen. Meanwhile, back at home, bleh. ToMoCo's domestic sales slumped 10 percent, dropping 43k vehicles compared to last year. Speaking to the Japan Times, Yoshihiro Okumura, from Tokyo's Chiba-gin Asset Management Co. says the downturn reflects a shrinking domestic pie. "It's becoming more difficult to make a large profit in Japan, as the market is shrinking and people aren't buying cars." In an attempt to spur sales, Toyota has unleashed  11 new or redesigned cars in the past 16 months. 

With Buick concentrating on the Chinese market, Cadillac going for a younger demographic and the Lincoln Town Car's future uncertain, someone has to take up the slack for us alter kochers. Toyota has a head start with the Avalon, but Nissan's making a move on the geriatric market. TheMatureMarket.co quotes Renault/Nissan CEO Carlos Ghosn as he states the obvious: "The average consumer on earth is going to be much older. We know also that usually the purchasing power is with older people. [That means] more money in the hands of the seniors and more seniors on earth." Watch for more Nissans featuring geezer-friendly technology such as backup cameras and perimeter sensors in the near future. Carlos didn't say if his company is working on a way to automatically cancel the turn signal after the car reaches a certain speed on the highway.

TTAC has not been shy about its scepticism regarding the owner satisfaction and quality surveys produced by JD Power, and the commercial links to the industry that they monitor. We have also pointed out that Consumer Reports' "secret sauce" (i.e. their analytical formulae) have certain limitations. Until now, we've overlooked another source of auto manufacturers' braggin' rights: the Intellichoice awards. While you'll hear Intellichoice mentioned in the same breath as JD Power in more than a few automotive advertisements, Intellichoice's awards don't get nearly the same scrutiny. It's time to correct this oversight.

Intellichoice offers awards in five broad categories: Motorist Choice, Best Deals of the Month, Best Overall Value, Smartchoice (with six subcategories) and Best Certified Pre-Owned Programs. They subdivide each of these categories by vehicle type, e.g. car, crossover, near luxury and convertible. Many of these categories are subdivided even further. I counted no less than 240 permutations, and I could have missed a few.

If that wasn't confusing enough, cars jump from class to class depending on the award. The Toyota Yaris was named "Best Overall Value – Subcompact Class." But when it comes to the "Low Ownership Costs" award, the Yaris lives in the "Compact" category. The Chevrolet HHR is the "Small Wagon" winner for "Low Maintenance Costs" but "Compact Crossover SUV" winner in the "Motorist Choice Awards." For the same award, the Lexus IS is the "Aspirational Luxury Car" but it's in the "Near Luxury Class" as the "Best Overall Value of the Year."

Intellichoice also categorizes certain cars differently from everyone else. Did you know that the Nissan Altima is a "Premium Mid-Size Car" and the Porsche Boxster is a "Luxury Convertible"?  Apparently, the Honda Accord is a "Compact" ("Lowest Maintenance Cost") and the Lexus SC 430 is a "Premium Sports Car"– except when it's a "Luxury Convertible" ("Lowest Repair Costs").

Another mystery: why do certain vehicles receive awards when the exact same model with a different body style (i.e. coupe vs. sedan) doesn't make the grade?  Intellichoice names the aforementioned Toyota Yaris named "Best Value – Subcompact Class" is only the hatchback model; the four-door wasn't included. Several pickup truck awards were given to the crew cab and extended cab models while the standard cabs stood on the sidelines.

After looking at Intellichoice's wide selection of seemingly arbitrary accolades, you can't help but feel that the gongs fall into the same category as kindergarten sports awards. Both processes seem aimed at preserving the delicate self esteem of a bunch of five-year-olds. Last year, almost every company that sells a car or truck in the U.S. received at least one Intellichoice award. Even floundering Isuzu was awarded "Lowest Maintenance Cost" in the "Small Pickup" category. 

This "something for everyone" mindset extends to a few of this website's Ten Worst Automobiles Today (TWAT) winners. The dead van walking Chevy Uplander won "Best Overall Value" in the "Cargo Van" category. It's almost-as-bad corporate cousin, the Buick Rendezvous, won an Intellichoice award for "Lowest Maintenance Costs" in the "Midsize Crossover" class. And the TWAT-worthy Aveo5 won in the "Subcompact Class" of the same category. 

It's obvious that a lot of awards given out by various magazines and newspapers are influenced (if not totally driven) by the pursuit of the almighty advertising dollar.  But even though there are links to get free quotes on vehicles, and links to finance and insurance companies, Intellichoice's website doesn't offer any direct links to automakers' sites or car ads. There's no indication of any outside influences that would entice the organization to devise such convoluted awards and then hand them out like candy.

That is, until you realize Intellichoice.com is owned by Primedia, the same company that brings us Motor Trend and Automobile magazines. While each of these magazines has their own (dubious) annual awards for a variety of vehicles, neither of them approach Intellichoice in number or complexity of awards. But both of them enjoy plenty of lucrative automobile manufacturer advertising revenue. These same manufacturers also drop big bucks for advertisements in other Primedia's other magazines.

Running a web site as timely and data rich as Intellichoice is an expensive business. Not to belabor the point, but the money to run their site comes from Primedia, which gets the majority of its revenue from advertisements. You don't bite the hand that's feeding you. Intellichoice has to keep Primedia's advertising clients happy. And if that means coming up with a few hundred awards to give out (some on a monthly basis), then so be it. 

And there's the fundamental problem. Just as an award for "Most Improved Left-Handed Pattycake Player" only resonates with the recipient's mother, the awards handed out by Intellichoice mean nothing to anyone but the manufacturers. Considering the low profile of most of these awards, you have to wonder if they mean anything at all.

In the second financial quarter, General Motors made $891m. The General's camp followers have been delighted with the slim not to say two percent profit. Meanwhile, GM North America (GMNA) lost $39m. The General has been almost universally commended for their U.S. division's performance, as it compares with a $3.95b loss in ’06. Supposedly, the move “close to profitability” indicates the rot has stopped, as a prelude to recovery. But lessening losses is not the same as making money, especially when you need money.

Make no mistake: GMNA needs LOTS of money. It needs tens of billions of dollars to eliminate the mountain of debt and obligations incurred in the downsizing process. Union buyouts, plant closures, ongoing payments to former parts maker Delphi, the upcoming Wall Street-requisite United Auto Workers pay-off– by the CFO's own admission, GM's cash conflagration is set to continue.

GMNA ain’t making it. Literally and figuratively. At best, GM CEO Rick Wagoner’s $9b in operational cuts have brought the automaker's U.S. expenditures in line with its reduced income. That’s fine, if you assume that income will increase from here on out and expenditure won’t. Both of which are false assumptions.

Next financial quarter, GMNA will shell-out $4b in capital expenditures. Annual plant closures and scheduled production cutbacks will also take their toll on their bottom line. More critically, if the two-month sales drop (July down 19%) is any indication, The General will continue to shed market share in a contracting market. Do the math. GMNA is about to make less money selling fewer vehicles.

After this false dawn, what then? Rabid Rick has two choices. He can slice more capacity from the system, continuing GM's death spiral. Or he can cut prices to move the moribund metal, further eroding his employer’s profit margins. Which are already crumbling under direct assault from Toyota and the transplants.

On Saturday, GM announced zero percent financing for up to 60 months on crew cab and extended cab Silverado pickup trucks. The move wipes some $2500 – $3000 off GM's pickup truck margins, halving their per truck profits. This after reigning-in Silverado production by 10 percent. Will there be another 'round of profit purloining discounts? Seems so. 

Once again, still, GMNA’s future depends on selling a lot of something that makes a lot of money; something other than what they’re already trying to sell. Now that GM’s new pickup trucks have failed to generate the anticipated turnaround bucks, GMNA must pin its hopes on the new Pontiac G8, Cadillac CTS, Saturn Astra and Chevrolet Malibu.

The General is only planning on importing, at best, 30k to 50k Aussie-built G8s for beleaguered Pontiac/GMC/Buick dealers. Cadillac sold 24k lame duck CTS sedans this year (vs. 73k refreshed 3-Series). Even if Caddy's new, spizzarkle-prowed model doubles its current sales total, it won't be enough to keep GMNA afloat. The Saturn Astra arrives from Europe at a loss. Which leaves the hopes of a company resting squarely on the shoulders of the new Chevrolet Malibu.

So far this year, GM sold 60k Malibus (many discounted to fleets). In the same period, Toyota sold 212k Camrys and Honda flogged 180k Accords (hardly any of which sailed with the fleets). If GM thinks it’s going to slay the competition with the new Malibu– whose form and function are not a million miles away from the slow-selling Saturn Aura– it’s sorely mistaken. Even if the Malibu is significantly better than the Camry and Accord (also set for a refresh), conquest sales will be like pulling teeth. The demand for an Camcord alternative doesn’t exist.

All of which leaves GM where it is now: depending on sales abroad to generate enough cash for the corporate mothership to stay afloat. That said, while 58 percent of GM’s Q2 unit volume originated oversea, these sales only accounted for 38 percent of the company's total revenues. GMNA's recovery remains mission critical. Besides, what happens if GM’s foreign operations go sour? Amid all the jubilation over GM’s overseas success, there are signs of struggle and danger.

According to GM’s numbers, their Asia Pacific market share is decreasing in an expanding market. GM Brazil has hit a production capacity wall. Shanghai Automotive’s hook-up with countryman Nanjing Motors reaffirms suggestions that The People’s Republic of China wants the lion’s share of their domestic market for themselves. The currency situation is volatile. And last but not least, Toyota's lean, mean, lean production machine is beginning to turn its attention to these ripe pickings– which could turn moldy in an international economic downturn.

In short, GM’s overseas profits are not guaranteed; whereas ongoing and increasing U.S. losses are a sure bet. On balance, the automaker isn’t. Even if GM worldwide continues to deliver enough cash to subsidize GMNA, we’re heading towards the point where GM’s Board of Bystanders must contemplate declaring GMNA bankrupt to save the corporate mothership. 

Business Wire reports that the law firm of Sheldon J. Schlesinger, P.A. in Fort Lauderdale, Florida has hit Lexus and corporate parent Toyota with a class action lawsuit relating to the ES350's airbag sensors. According to Lexusdefect.com, "many owners have found that these sensors are intermittingly turning off thereby creating a situation where… the air bag would not deploy." The lawyers also maintain that "company spokespersons have stated that there is a problem, but they do not know how to fix it." Without citing any statistical evidence to support the allegation, they "believe that there is strong evidence this problem effects every single ES 350" and warn "if you have not experienced this defect, that does not mean it is not present." They aren't asking much– just for Lexus to recall and re-purchase the cars at their full cost, give full refunds to lessors and "compensatory damages for all costs and loss of value." 

There comes a time in many a life when an individual must prove to the world they are no longer the student, they have become the master. The transition usually arrives on the field of battle, whether it’s a real battlefield, competitive sports, academia, entertainment or business. In the case of Toyota, their moment of ascension arrived when their products outsold General Motors’ in the first quarter of 2007. Toyota bested The General by a score of 2,348,000 to 2,260,000. Toyota is the new numero uno. But it still has much to learn, if it is to avoid following its old, corpulent mentor's footsteps off the high tower of greatness.

Before Toyota became the heavy weight sumo champion of the world, their corporate samurai wanted to be just like Ford, and then GM. After all, the Americans in general, and General Motors in specific, were the automotive industry. The General dominated the world’s largest automotive market– to the point where the U.S. federal government tried to break up the behemoth by hiving-off Chevrolet. Its products were spread throughout the world, capturing customers in every corner of the globe.

Toyota came to America as representing (for many) a former military aggressor, the enemy. Starting with the Toyopet, they peddled funny little cars that were the subject of scorn, derision and dismissal. Undaunted, Toyota refined its products and process (which allowed for faster model changes). Toyota’s tighter panel gaps, better engines and conservative design helped it establish a beachhead. But it was reliability that set them apart and secured their success.

Enthusiasts may label Toyota’s products “soulless appliances,” but the automaker’s mass appeal lies in this anodyne dependability. While GM, Ford and Chrysler concentrated on style and power, Toyota focused its energies on quality and, thus, reliability. The focus catapulted them to the top.

Flash forward to 2006. Toyota was ranked fourth in JD Power and Associates’ Initial Quality Study (IQS), with only 106 problems per 100 vehicles. Lexus has historically been the number one brand according to JD and the gang. In 2007, just as Toyota sold more cars than everybody else, the company initial quality ranking dropped from fourth to seventh, behind such historically horrid brands as Jaguar and Lincoln. Lexus was knocked from its perch at the top of the IQS mountain by Porsche.

What of the newest addition to the ToMoCo household? Scion has never cracked the IQS top 10. In fact, in 2004, a year after the brand was introduced into the U.S., Scion was ranked thirty-fourth, one slot above Porsche. As stated, Porsche turned it around. So why hasn’t Toyota taken care of the newest addition to his family? 

Scion is a spooky echo of GM’s Saturn. Both brands birthed when their corporate motherships were flush with cash. Both brands were heralded as changing how consumers would buy vehicles, with fresh vehicle design, friendly dealers and no haggle pricing.

Saturn has lost is its way, but what about Scion?  For a few years, all seemed to be going well, much like Satrun's early days. Scion released cool, unconventional, entry-level vehicles that were highly customizable. Then came the first redesigns.

Gone are the cheeky, interesting shapes of the first-generation xA and xB. In their place: blander, fatter vehicles that seem tailored to an older generation. As TTAC’s Paul Niedermeyer reported, Toyota seems to have learned some not-so-good tricks from GM, managing to ignore and dilute a successful brand’s direction with lazy, “bigger is better” design. 

In Scion, ToMoCo also seems to have unlearned one of its better tricks: maintaining model names. Toyota has one of the most loyal consumer bases in the automotive industry (again, due to its rep for build quality). Keeping the same core model names has played a large part in generating and directing this brand loyalty, as most Toyotaphiles simply trade in their old Camrys or Corollas for completely new ones. 

Scion has dropped the xA moniker in favor of its all new replacement, the xD. Ignoring the fact that the American psyche is all about getting an "A" (when was the last time you were rewarded for bringing home a D?), Toyota has hampered consumer loyalty to the xA and Scion by dumping a decent model and its moniker for an inferior bloatmobile.

Toyota says its taken dramatic steps to sort out its quality issues. As it’s what they do best, we should see some movement soon. But the company is just beginning to learn that doing just one thing better than anyone else puts you in a vulnerable position. The competition can catch up. Unless they learn the lessons of their vanquished enemies, they will be condemned to repeat them. It looks as if that process is already in motion.

"It's deeply disappointing that Toyota has joined in the lie-and-threaten game," says Dan Becker, director of the Sierra Club's global-warming program. Speaking to Automotive News [AN, sub], Mr. Becker is referring to Toyota's decision to join The Big 2.8 in lobbying Washington to throttle back on plans for higher Corporate Average Fuel Economy (CAFE) standards. The effort is sure to tarnish the transplant's green credentials and stoke the fires of domestic partisans, but it makes perfect sense. As AN points out, Toyota's combined car-truck fleet peaked at 26 mpg in 1983, and ToMoCo is enjoying full-size profits generated by its full-size SUV's and pickups. The real story here is Toyota's 'tude towards the Detroit. Apparently, they want to compete "relentlessly, but not ruthlessly." "We don't want to see our competitors in any worse financial shape," claims Josephine Cooper, Toyota's group vice president for government and industry affairs. Methinks they will. 

We repeat: the Toyota Prius is the official car of the intellectually superior. According to InsideBayArea.com, after trailing Camry, Corolla, Accord, and Civic in Santa Clara County in California's Silicon Valley last year, Prius has outsold all four through May of this year. Ron Diridon, executive director of the Mineta Transportation Institute at San Jose State University and himself a Prius militant owner, shows no lack of hubris in his assessment of the situation: "The intellectual capacity within Silicon Valley is amazing. That higher level of education reflects a higher level of understanding of the terrible consequences of global warming." Intellectual superiority aside, the free pass to the carpool lane that was available for Prius drivers, the outrageous price of gas in California and the fact you can now buy a Prius for less than sticker had a bit to do with it as well.

The Chinese auto market is booming. Thirty-four new models entered the PRC fray in the first half of this year. Unfortunately, "booming market" doesn't necessarily equate to high sales. Gasgoo.com makes the point with their list of the ten worst-selling cars in China. There are a few familiar names on there: Acura TL, Mitsubishi Galant, Kia Rio, Hyundai Sonata and Toyota Prius. The list also includes the car that Buick fanboys have lusted after, the Holden-based Park Avenue. It'll be interesting to see how long they keep these models on the market in China, or if they'll try to export them to maintain production in the face of low sales.