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Toyota's sales beat GM's for first time

TOKYO — Toyota Camry, take a bow. Prius, bask in the limelight. Strong demand for those models helped propel the Japanese car maker onto the throne as the world's largest auto seller — at least for the first quarter of 2007.

Through a shrewd combination of investing in environment-friendly vehicles, offering sharp new models and wooing drivers with brand power, Toyota has toppled GM from the top global sales spot for the first time ever, sales figured released on Tuesday show.

Whether it becomes the world's No. 1 automaker depends on annual worldwide vehicle production, rather than sales, and final bragging rights for that won't be decided until production numbers are tallied for the whole year.

But analysts say Toyota is advancing precisely in those areas that General Motors Corp. has fallen behind, making it likely that Toyota will snatch from GM the title it has held for 76 years.

Toyota Motor Corp. sold 2.35 million vehicles worldwide in the January-March period, surpassing the 2.26 million vehicles GM sold in the quarter, according to preliminary figures.

In 2006, Toyota's global output rose 10 percent to 9.018 million vehicles, while GM and its affiliates produced 9.18 million vehicles worldwide — a gap of about 162,000. In the first quarter, Toyota made 2.37 million vehicles worldwide, while GM has only given a planned production number of 2.34 million vehicles. But Toyota has long beaten GM in profitability, racking up record profits for the past four years, with $11.8 billion profit for the fiscal year through March 2006. GM lost $2 billion last year.

Koji Endo, auto analyst with Credit Suisse in Tokyo, believes the trend of Toyota outdoing GM is very difficult to reverse.

"Toyota sales are booming because of its good image around the world about reliability and ecological technology," he said. "It's just the opposite for GM, and its image is deteriorating."

Toyota's fuel-efficient cars, such as the Corolla, Yaris and gas-electric hybrid Prius, are big hits because of surging gas prices.

GM said although Toyota won the first quarter, the fight for global leadership is not over for the year. A company spokesman said it would not chase market share solely to recapture the lead from Toyota, and it has no special plan to retake the lead.

"We also had a record first quarter globally. We set sales records in three out of our four regions," said spokesman John McDonald. "We've got our first quarter underneath our belt. Let's see what the rest of the year holds for us. We're going to fight for every sale," he said.

The cycle of good news keeps getting better for Toyota, however, as it can use its profits to keep growing. With the company doing so well, morale is high at Toyota, while GM tends to be dragged down by battles with its union, Endo said.

But Endo also warned that increased size also brings other problems like trying to ensure quality and manage a sprawling network of manufacturing and sales.

"As your volume gets bigger and bigger, in many cases efficiency tends to drop," he said. "There might be a risk of being over-stretched." Toyota was founded in 1937 by the Toyoda family, whose members continue to play key roles and are a symbol of emotional unity for the company and its employees.

Perhaps more famous than the Toyoda family are the company's innovators, such as Taiichi Ohno, credited with inventing just-in-time production to reduce inventory, and the philosophy of worker-empowerment called "kaizen," allowing workers to keep improving production methods and hold the critical power of shutting down the assembly line at any time.

Companies around the world, including those outside the auto industry, have adopted Toyota's methods. Universities, both in and outside Japan, study the Toyota method.

Toyota is also well-known for nurturing worker loyalty by offering lifetime employment. The last time Toyota resorted to massive job cuts was during hard times in 1950.

GM, meanwhile, has been recently negotiating severance packages with thousands of workers in an effort to turn around its North American operations.

Modesty is also a Toyota trademark, and executives have repeatedly played down the prospects of beating GM as the world's top producer of cars and light trucks.

Asked that question last week in Detroit, Toyota President Katsuaki Watanabe said: "You will never know until all the numbers are in." Instead, he said Toyota must continue to improve its quality from the top down to remain a leader in the auto industry.

"We're still developing in many regions of the world. I don't regard that as a success yet," he said.

GM doesn't give yearly forecasts, but Toyota is shooting for global output of 9.42 million vehicles and sales of 9.34 million units.

While Toyota appears on course to supplant General Motors this year, GM's moves to boost overseas production could keep it in the running. The company's sales in China jumped 32 percent last year to 876,747 units, making it the market leader there, and it is also building a new factory in India, another market with tremendous potential.

But analysts note that Toyota's success required long-term planning and years of hard work.

"Winning didn't happen overnight," said Koichi Shimokawa, business administration professor at Tokai Gakuen University. "Japanese makers built their business, slowly but surely, accumulating technology and developing good cars." ——— Associated Press writers Hans Greimel and Kozo Mizoguchi in Tokyo and Tom Krisher in Detroit contributed to this report.

Katsuaki Watanabe, president of Toyota Motor Corp., sits in a Toyota Camry produced at the Subaru of Indiana Automotive plant in Lafayette, Ind. - AP