As a symbolic moment, it's probably significant that General Motors (NYSE: GM ) lost to Toyota (NYSE: TM ) the title of world's biggest automaker, at least in terms of cars sold. For the first time in 77 years, Toyota moved more vehicles off the lot than did GM, 8.97 million to 8.35 million. But in reality, that moniker is of little use. It only meant that GM had learned how to lose more money on every car sold than its counterpart did.
Heavy is the head that wears the crown
Between the years 2005 and 2007, General Motors lost more than $51 billion while racking up an additional $21 billion in losses through the first three quarters of 2008. Toyota, on the other hand, earned over $40 billion and nearly $8 billion, respectively, over the same periods, although it is expecting to record its first operating loss in 70 years by the time its fiscal year ends in March.
In fact, titles like that are completely meaningless when you're just struggling for survival. GM has until mid-February to come up with a viability plan to submit to Congress so that it can receive additional funding. However, it's still waiting to receive the check for $5.4 billion that was part of the $13.4 billion loan guarantees that the Treasury Department approved in December. While the check should be arriving shortly, GM says that if they don't get it, they'll run out of money, no question about it.
Paved with good intentions
And survival is all that GM, Chrysler, and Ford (NYSE: F ) are thinking about these days. U.S. automakers saw sales fall in December anywhere from 31% (for GM) to as much as 53% (for Chrysler). But foreign automakers weren't immune either. Toyota was off 37%, Honda (NYSE: HMC ) was down 35%, and Nissan (Nasdaq: NSANY ) was running 31% behind last year's numbers. If it keeps up like this, Toyota's title shot may be transient indeed.
The real winner will be the car company that's the smallest, but profitable. Ford started down that road when it sold both Jaguar and Land Rover to Tata Motors (NYSE: TTM ) and decided to concentrate on being a maker only of Fords. GM is now looking to reduce its brands to a core of just four nameplates: Cadillac, Chevy, Buick, and GMC.
Taking a different path
Chrysler, however, is going a different way. Earlier this month it announced plans to introduce 24 new models over the next four years. It's also looking to produce several lines of small cars with Italian carmaker Fiat -- so long as the government is willing to shoulder the risk. In exchange for technology and cars (but no cash) that Chrysler would then build and sell in the U.S., Fiat will take a 35% stake in the carmaker. But that's contingent on it snagging another $3 billion in government loans based on the approval of a February 17 long-term viability plan. Fiat last made cars for the U.S. market in the early eighties.
Be satisfied with rubbernecking
Big, small, or somewhere in between, the U.S. car market is going to end up a radically different place. Titles won't mean much if consumers aren't driving cars off the lot, meaning investors would be wise to steer clear of any carmaker until someone can offer clear evidence that they know how to sell cars here again.