How Toyota Is Avoiding Becoming Another GM
The Japanese giant isn’t interested in wholly owning more brands.
Toyota Motor Company feared turning into the next General Motors when it passed the U.S. automaker to become the world's largest, by annual volume, in 2008. No doubt president Akio Toyoda and his managers were relieved when the Volkswagen Group passed Toyota to take first place a few years later.
VW Group now is leading the march from internal-combustion engines to electric vehicles but being number one isn't doing it any favors. Electric and automated vehicle technology—think self-driving electric city cars—cut into every major automaker's bottom line, let alone one that has suffered more than $30 billion in fines so far in the U.S. and European Union as a result of the diesel cheating scandal.
GM and Ford Motor Company are paying for EV/AV development with fat truck and SUV profits. Toyota is, well, Toyota, known for efficiently making mainstream cars and trucks that last forever. It has long been a profit-making machine, churning out high-volume models on its own while it teams up with smaller manufacturers for niche segments.
But the EV/AV investments are huge, and as any short-seller of Tesla shares will tell you, slim on profits. The big automakers, VW Group, Toyota, GM, Ford Motor Company, Nissan, Honda, Daimler, BMW, Fiat Chrysler, and even Hyundai are vulnerable to uncertainty of the coming decade. The smaller automakers are especially so. Japan probably should have just three survivors, Toyota with Lexus, Daihatsu, and Hino; Nissan with Infiniti, and Honda with Acura.
None of the others are at the forefront of EV/AV development, though Mitsubishi has shown some strength in plug-in hybrids lately, especially after it was folded into the Nissan-Renault Alliance.
Toyota is seen as a sort of Japanese auto industry godfather, stepping in when the smaller companies are in trouble, such as when GM sold off its minority interest in Subaru and Isuzu after the American automaker's '09 bankruptcy. Toyota took a stake in Fuji Heavy Industries (now officially called Subaru) and they jointly developed the Toyota 86/Subaru BRZ. The Subaru Ascent was supposed to be built on the Highlander platform, which would have meant an inline-four and maybe a V-6, instead of its turbocharged flat-four engine, but in the end Subaru developed its big SUV itself.
Toyota isn't becoming GM or the next VW Group. It's not swallowing up smaller Japanese manufacturers or becoming a controlling interest, which would mean taking just a 33.4 percent stake under the country's business law. Under the capital alliance announced August 27, Toyota will purchase $908 million in Suzuki shares, or a 4.8 percent stake, and Suzuki will purchase $455 million in Toyota shares, or about 0.2 percent.
Toyota has come under criticism for choosing to partner with BMW on development of the new Z4-based Supra sports car, but it has long favored sharing manufacturing and development resources. Yamaha built the 1967-70 2000GT sports car for Toyota, and the two have long collaborated on engine development and manufacturing, motorsports, and marine engines.
Next up following the 86/BRZ project with Subaru is Toyota's new Alabama factory shared with Mazda, where the latter will build an all-new SUV based on Toyota's very flexible TNGA architecture. One rumor has it that Mazda, which is well behind most of the industry in EV and hybrid development, will power its new model with an electric motor and a Wankel rotary range-extending engine, while the Toyota coming from the same factory will be a new subcompact SUV with more conservative styling compared with the CH-R, and with hybrid and all-wheel-drive options. (Toyota itself has concentrated on hybrids and fuel cells, to the detriment of EV development.)
What will Toyota get out of its deal with Suzuki? Probably not anything we'll see in North America, at least for the time being. Suzuki is big on motorcycles, of course, but Toyota already is close with Yamaha.
Suzuki also is known as the kei-car manufacturer for most of the Japanese industry. These are the 600cc-powered runabouts sold mostly to farmers and other residents of rural Japan, and Suzuki's role in producing the propensity of this segment is not unlike Taiwanese bicycle brand Giant producing most bikes for other brands sold in the U.S. (93 percent is a number I recently heard). Subcompact hatchbacks seem to be gaining favor in the world's population centers, especially when reconstituted as crossovers, but Toyota does own Daihatsu, so it doesn't need help there.
Enthusiasts will hope Toyota can find a way to export the new Suzuki Jimny off-roader (above), the subcompact Wrangler that Jeep should have built, but I doubt it has been designed to accept the modifications it likely needs to meet U.S. crash and emissions standards.
I suspect the underlying motives for Toyota's deal with Suzuki first relate to the protective attitude the Japanese government has toward the auto industry. The Japanese auto industry looked ready to rule the world by the time of the 1992 global recession, and Japan's subsequent quarter-century-plus of economic malaise. Now, that country's industry remains much bigger than Japan alone, but it's not influential in every market—mostly just the considerable markets of Asia-Pacific and North America.
Whereas the U.S. and Germany each have three major manufacturers left, Japan has six manufacturers that also sell in North America (five if you count Mitsubishi as part of Nissan-Infiniti), plus Suzuki and Isuzu, who no longer offer cars here. Anywhere else save for the emerging Chinese and Indian industries, the smaller manufacturers should have either gone out of business or let themselves be swallowed up by Toyota, Honda, or Nissan. Instead, Toyota is making the kind of minority ownership alliances that U.S. and European automakers dream of (and which VW and Ford seem to have achieved).
Japan's government remains protective of its singular auto industry. If its locally dominant automaker, Toyota, can smooth out market fluctuations by rationalizing assembly-plant output and maintaining a stable supply chain with these alliances, Japan might remain the only developed economy that can survive the uncertainty of the 2020s auto industry with a Big Three that are not the Only Three.