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January 23 2008: 12:16 PM EST
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GM ties Toyota -- and declares a win

A dead heat in the global sales race represents a moral victory for the American automaker.

By Alex Taylor III, senior editor

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GM CEO Rick Wagoner expects sales in emerging markets to keep growing.

NEW YORK (Fortune) -- You can put a negative spin on this if you like: General Motors, once the undisputed global leader in automobile sales, lost half its crown in 2007 when it was tied by Toyota.

Indeed, it may see its shared title go away entirely in a couple of weeks, when Toyota (TM) comes up with a precise total for the number of cars and trucks it sold. Counting auto sales is a bit like counting votes in Chicago, and now that the polls have closed, Toyota will have a clear target to shoot for. Not that Toyota would do anything unethical or dishonest; it is just that there are lots of different ways to record a sale.

But the news is not really about Toyota catching GM (GM, Fortune 500) and, likely, eventually passing it. It is about how GM, once caricatured as the stumbling dinosaur of the global auto industry, has managed to hold off Toyota for the past 12 months by notching a remarkable performance overseas.

Despite its historic roots in North America and Europe, GM is really acting like a global company these days. As it revealed on Wednesday, it is now selling one million cars and trucks a year in China, half a million in Brazil and a quarter of a million in Russia. It is hard to imagine three markets with more different characteristics. GM's performance demonstrates great flexibility, agility, breadth and depth.

All those attributes will stand it in good stead going forward. As CEO Rick Wagoner told analysts last week, GM expects industry sales in emerging markets like those to leap from 27 million to 39 million by 2012.

In mature markets, growth will be tiny by comparison. GM sees sales moving from 44 million in 2007 to 46 million in 2012. "The growth is not in North America and the growth is not in Western Europe," said Mike DiGiovanni, global sales analyst, on Wednesday. "The growth is in Eastern Europe, Central Europe, Latin America and Asia."

That's the best kind of news that GM could have, because it means that Toyota is going to find it harder to grow in the United States, where it has been making big strides. Since 1990, Toyota has gone from selling one million cars here to selling 2.6 million last year.

But Toyota has filled all but one of the big vehicle segments (the only one left is full-size vans, which it doesn't plan to enter) with model offerings, and now will have to be content with exploiting smaller and smaller niches. Witness the 2009 Toyota Venza that it showed at the Detroit auto show last week. Attractive thought it may be, it is really nothing more than a reinterpretation of the Camry station wagon that was discontinued for lack of interest.

At the same time, Toyota will find the competition stiffer as it refreshes its offerings in existing segments. Despite revamping and improving the Tundra fullsize pickup truck, Toyota still fell short of its first-year sales goal of 200,000 units.

Toyota has another handicap: It is chained to one of the slowest growing markets of all. That's Japan, where the number of car sales is actually shrinking because the population is aging and young people would rather spend their money on cell phones and video games. GM has never been able to crack that market and today is probably happy that it hasn't tied up any resources there.

There are of course lots of things that could slow GM down. Number one on the worry list is a global economic crackup. As DiGiovanni points out, market fears ricochet across continents with lightning speed these days and panics in one time zone can easily multiply by the time they hit the next one. And emerging markets can be highly volatile. Wagoner has first-hand experience with this, having served two tours in Brazil.

For now, however, GM has snatched at least a tie from the jaws of defeat and should wear its shared crown with pride. To top of page

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