We’re Number… uh… Two!

“Losing a game is heartbreaking. Losing your sense of excellence or worth is a tragedy.” -  Joe Paterno

The latest monthly global automobile sales figures are out and they mean one thing. Any minute now Toyota will overtake GM and become the largest car company on earth.

It's amazing. When I was a kid, GM was not just the largest automobile company, it was the largest company on earth, period. It was the symbol of America itself: proud, monolithic, innovative, bold and the envy of all. The suggestion that in the future it could be surpassed by, of all things, a Japanese company would have brought howls of laughter. If you are old enough you will remember, there was a time when "Made in Japan" meant cheap and shoddy imitations - the time when Japan renamed a city "USA" and another "Sheffield" and when Japanese companies adopted names like "Roberts" to hide the origins of their products. Then came SONY….

How things can change in a few decades when the stewards of wealth and power (and other desirable assets - such as freedom) are not the creators of them, but rather the inheritors of them. GM is, indeed, the perfect symbol of America.

So, how could this happen? I am no economist, historian or other kind of expert, but I do have an opinion. A few things that come to mind that I believe indicate the nature of the prevailing attitudes and cynicism that allowed the change. In the past few decades the following things have happened or have been ongoing conditions:

1. The ratio of engineers educated to lawyers educated in Japan is about the reciprocal of the figure for America - something like 3 lawyers for every 7 engineers in Japan and 7 lawyers for every 3 engineers in America.

2. A similar reciprocal is found in R&D. American companies spend the vast majority of their R&D budgets creating new products. Japanese companies spend theirs in perfecting existing products.

3. At some point (in the 60's, I believe) GM informed it's dealers that they would henceforth see lower profit margins on the sale of new cars but they would more than make up the loss with increased profits from service - i.e. the beginning of planned obsolescence and such reprehensible, customer-gouging practices as creating screws for headlamp fittings with odd heads that could only be serviced by a GM mechanic having the GM proprietary tool.

4. At another point (the 80's?) GM crossed a line: It began making most, if not all, of its profit not from manufacturing and selling vehicles, but from financing them (GMAC). Can GM legitimately even be called an auto company anymore? Is it not, in reality, a financial services company with a manufacturing division?

There are no doubt a million arcane economic reasons for GM's decline in the market and Toyota's rise (including the obviously non-esoteric one - Toyota makes good cars and GM, by comparison, doesn't), but those few notes above illustrate the atmosphere in which this monumental shift in power has taken place. GM lost sight of its founding principles; Toyota remained focused on its. Interesting.

There was a time when it could be said that America was far and away the most free nation on earth. Can that still be said, or is a Toyota or two about to slip into that position being gradually, but willingly, abandoned by Washington and its electors?