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Analysis: GM ready to reclaim No. 1 on sales Toyota can't match

SOUTHFIELD, Mich. — Less than two years after declaring bankruptcy, General Motors is poised to reclaim the global auto sales lead from a Toyota Motor Corp. rattled by natural disasters and reports of slipping quality.

GM might retain the top spot after auto-parts production in Japan recovers from the March 11 earthquake. Detroit-based GM plans to invest at least $5 billion in China to double sales to 5 million vehicles by 2015. After years of losing ground in the United States to cars like Toyota's Camry, GM's Malibu has won better reviews and a new version is coming.

Add it up, and GM might retake the sales crown lost in 2008, when the U.S. automaker lost $30.9 billion and sought a federal bailout after Toyota's most profitable fiscal year. Today, GM is on the mend while Toyota confronts a slumping reputation, a stronger yen that hurts profit on U.S. sales, and the prospect that its production in Japan won't recover until November.

"It's safe to say that GM is crawling back in the mature markets and growing quickly in emerging markets," said Jeff Schuster, executive director of forecasting for J.D. Power & Associates, a research firm in Westlake Village, Calif. "It's a challenging road ahead for Toyota. They face some real issues in the U.S."

Toyota President Akio Toyoda in March said he would start a campaign to rebuild the company's image in the United States after recalls that totaled more than 10 million vehicles. Toyota had to repair the cars because sticking accelerator pedals and faulty floor mats led to some sudden acceleration claims.

The Toyota City, Japan-based automaker this week plummeted to 43rd place from No. 20 in Harris Interactive's annual poll assessing the reputation of 60 corporations.

Even before the recalls, auto critics were saying the competition had started catching up to Toyota. Edmunds.com rated the 2008 Malibu higher than the Camry, which is built at Toyota's plant in Georgetown. While Consumer Reports still recommends many Toyota models, its critics find Toyota is using cheaper interior materials these days, said Jake Fisher, senior auto engineer with the magazine.

Toyota's margins have also been hurt by a weaker dollar. Of the cars and SUVs the company sells in the United States, about 30 percent are made in Japan, including 11 of 12 Lexus models and all Prius hybrids. After years of a weak yen boosting profits, the Japanese currency has strengthened to 81 yen to the dollar from 112 at the end of 2007.

Each 1 yen change versus the dollar equates to about $370 million of effect on annual profit, Toyota said.

In China, the world's fastest-growing car market, Toyota has been slower to invest in factories and small, inexpensive cars.

GM arrived earlier and has won over consumers with high-end Buicks and cheaper Korean-engineered Chevrolet models, said Michael Dunne, president of Hong Kong-based Dunne & Co., which consults on the auto market in China and the rest of Asia.

"GM has the right products and very good momentum," Dunne said.

The bankruptcy proceedings left GM with a strengthened balance sheet, and the carmaker has maintained market leadership in the United States and China. GM earned $6.17 billion last year, the most since 1997, and Chief Executive Officer Dan Akerson is hurrying new models, pushing for more electric-drive cars, and investing in Brazil and China.

GM even gained share this year in profitable U.S. pickup sales. Its Chevrolet Silverado and GMC Sierra have increased deliveries in the first three months of the year by 30,418 — more than the total number of Toyota Tundra pickups sold in those months. The Japanese automaker in 2007 approached its goal of selling 200,000 Tundras a year. In 2010, it sold 93,309.

J.D. Power had predicted another tight race in 2011 after last year, when Toyota's sales of 8.42 million vehicles exceeded GM's by 30,000. Now GM is gaining, said Schuster, the J.D. Power forecaster.

Toyota has lost production of about 500,000 vehicles since the March earthquake and tsunami in Japan, said Javier Moreno, a spokesman. Full output won't return before November. GM has also boosted U.S. deliveries through March this year by 69,000 more than has Toyota.

"Given the turmoil Toyota is in right now, GM is poised to take the No. 1 spot," said Henner Lehne, global director of sales forecasting for research firm IHS Automotive. "In the near term, we have GM overtaking Toyota. It will be a battle over the next several years."

GM, which last month revealed a redesigned Chevrolet Malibu in Shanghai and New York, needs to keep growing in China to stay ahead of Toyota and Volkswagen AG, he said. Wolfsburg, Germany-based Volkswagen also aspires to lead global sales, Lehne said.

Volkswagen, the world's third-largest carmaker, aims to increase deliveries 5 percent in 2011 after reporting record sales of 7.2 million last year. Toyota said in December it expected to sell 8.37 million vehicles this year after delivering 8.42 million in 2010. GM, which sold 8.39 million vehicles last year, hasn't given a 2011 target.

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