Two men, one failure

Toyota's rise to the top is down to its brilliant leadership, and GM's failures. It was only sixteen years ago that Toyota first entered the US car market. A foolish idea, most experts reckoned. Bad enough taking on the best – General Motors – but to do it in its own backyard smacked of lunacy.

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By  Anil Bhoyrul Published  April 9, 2006

|~||~||~|Toyota's rise to the top is down to its brilliant leadership, and GM's failures. It was only sixteen years ago that Toyota first entered the US car market. A foolish idea, most experts reckoned. Bad enough taking on the best – General Motors – but to do it in its own backyard smacked of lunacy. Sixteen years on and, boy, how the tables have turned. This year, Toyota is expected to become the world’s biggest car company, having sold nine million vehicles around the globe. As for GM, it is still reeling from US$10 billion losses last year and a proposed 30,000 job cuts. Last week, it announced plans to sell a majority stake in its financing business. The US$14 billion sale, to a hedge fund-led group, will strip GM of one of its most profitable arms. The GM story can’t really can't get much worse. While the Toyota story doesn’t get much better. In 2000, Lexus became the biggest selling brand in North America. And only seven years since listing on the stock market, Toyota is now valued at nearly US$200 billion – more than seven times the combined value of GM and Ford. Which leads to the big question, what went so wrong for GM and so right for Toyota? As with any business, it comes down to people, and leadership. Rick Wagoner, president of GM, says his golden rule is “keep it simple.” Katsuaki Watanabe, president of Toyota, says his golden rule is “create dreams.” Which one works? Wagoner, of course, has kept things so simple, he managed to completely misjudge the competition, and has steered the company into disappointing sales, spiraling pension costs, and crippling liabilities. His insistence on managing the status quo has seen GM become a stagnant company that is now only heading downwards. His offer to take a 50% pay cut is too little too late, and on the scale of US$10 billion losses is really only a gesture. The “simple” fact is he longer has the confidence of the staff, the analysts or even his customers. Watanabe meanwhile has been creating dreams – he made sure Toyota was the only car manufacturer to have its own chip manufacturing line. His determination to build hybrid cars has never waned, and is now on the verge of success. So who is the better leader? The answer is simple.||**||Single file to chaos|~||~||~|Last week the Gulf’s six central banks met to finalise plans for a single currency. According to UAE central bank governor Sultan Bin Nasser Al Suwaidi, everything is on track for a single currency launch in 2010. Hang on a minute? Have we missed something here? Launching a single currency would be the most important economic decision ever taken in the Middle East. It will have untold impact on jobs, businesses and trade. It can, as has been seen in Europe, bring down strong economies in order to prop up weaker ones, as part of a common interest rate policy. It is, to put it mildly, a pretty big deal. However, it appears a GCC Monetary Authority has now formed a technical committee, to work out the most vital issue, that of the convergence criteria. This issue is simply too big to be thrashed out by an unknown and, so far unchosen, committee. Whether or not we need a single currency needs serious debate. Rushing it through in the next four years is a road to economic disaster.||**||Stocks and students|~||~||~|I have never been a great fan of so-called “experts” when it comes to the stock market. Most, in my view, know as little as I do. And this week I think I have been proved right. Two weeks ago, 2,700 students from 38 colleges and universities were give a fantasy fund of AED1 million with which to build a portfolio of DFM listed securities. The results have been amazing. Osama Abdul Razak of Sharjah University has seen a portfolio growth of more than 800 per cent. Mohammed Ibrahim, from UAE University, is second with growth of 700 per cent and Haytham Shahada of Sharjah University is a close third, with growth 600 per cent. Of course, many have suffered huge losses, but the point is that a bunch of teenagers have managed to play the stock market far better than the experts. No close analysis of price/earnings ratios and long term growth – just following their hunch, and the proven principle of buy low, sell high. ||**||

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