Toyota Earnings: What It Takes to Move Ahead of GM and VW

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There has been a competition for the top position in global car sales for six years, since General Motors Co. (GM) lost its top spot in global share to Toyota Motor Corp. (TM). GM's Chapter 11 filing knocked it out of a position it had held for decades. The two have lurched back and forth between the top two positions ever since. And Volkswagen management says it will overtake both within five years. Toyota's earnings made the statement that its advantage over its two rivals has improved, particularly financially.

The largest car manufacturer in Japan reported that in the quarter that ended on Sept. 30:

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On a consolidated basis, net revenues for the period totaled 12.53 trillion yen, an increase of 14.9 percent compared to the same period last fiscal year. Operating income increased from 693.7 billion yen to 1.25 trillion yen, while income before income taxes was 1.34 trillion yen. Net income increased from 548.2 billion yen to 1.00 trillion yen.

Critics of Toyota's success will argue that the value of the yen was the most important component in the manufacturer's success. But that is by no means the reason Toyota has done so well:

In North America, vehicle sales totaled 1,298,044 units, an increase of 37,316 units.

Toyota has held its market share in the United States at 14.4% through the first 10 months of 2013, which is level with last year. Its 1,867,155 in sales for the period are just shy of Ford Motor Co.'s (NYSE: F) at 2,078,939. Ford sales are based primarily on three models: the F-150 pickup, the Fusion and the Escape. Sales increases for each have been in the double digits so far this year. While Toyota can boast about its U.S. success, Ford has models that almost certainly will keep it in the number two position for several years.

Absent from Toyota's bragging about its numbers was any direct mention of China, a market in which it has to be successful if it wants its global sales to continue to move well ahead of its rivals. It must scurry against the success of GM and VW, which alternate first place in China sales. Every major multinational manufacturer knows that it must do particularly well in the world's largest car market. That is Toyota's only big challenge.

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