GM moves back ahead of Toyota

NEW YORK (CNNMoney.com) -- General Motors, which fell behind Toyota in global sales for the first time in the first three months of this year, has edged narrowly ahead of its Japanese rival in terms of 2007 sales.

Toyota (Charts) global sales for the first nine months of the year hit 7.05 million vehicles, up 7 percent from a year ago, the Japanese automaker announced early Monday. GM (Charts, Fortune 500) released figures last week that showed global sales of 7.06 million, which was up just over 2 percent from a year ago.

The assembly line of a GM joint venture in China. Strong sales gains in China, coupled with a drop in Toyota's U.S. sales in the third quarter, allowed the U.S. automaker to move back ahead of its Japanese rival in global sales.

The gap in third quarter sales was slightly larger, as GM sold 2.387 million vehicles, up 4 percent, while Toyota sold 2.237, which also represented a 4 percent gain.

In the first quarter Toyota moved ahead of GM in global sales for the first time. It was slightly behind GM in the second quarter, but it still had the lead in year-to-date global sales for the first six months of the year.

Toyota spokesman Paul Nolasco had no comment on the comparison to GM sales. GM spokesman John McDonald also said the company wasn't particularly concerned with whether it was in first or second place in the sales count.

"We're not focused on being No. 1 and who's No. 2," said McDonald. "We like being No. 1. We've been No. 1 for 76 years on an annual basis. But while it's a real interesting story to the media, I don't know a single customer who uses that criteria when making the decision on where to buy a vehicle."

Tom Libby, senior director of industry analysis for J.D. Power, said that the fact that GM moved back ahead in the race for No. 1 does not mean its competitive challenge from Toyota is behind it.

"This may very well go back and forth from quarter to quarter," he said. "It's obviously a very competitive situation. To draw any major conclusion after a quarter or even three quarters is premature."

GM was helped by particularly strong sales gains in China, which is the fastest growing market for new car sales in the world. Its sales in the Asia Pacific region were up nearly 16 percent in the third quarter, helped by a 21 percent rise in sales of its Chinese joint venture.

Meanwhile Toyota has depended on growth over the years from the United States and North America, the largest market for its vehicles. But as auto sales softened industry wide in the United States in the quarter, Toyota posted a rare year-over-year drop in U.S. sales in the month, seeing its sales decline nearly 5 percent in the United States in the period.

"It is at least partly a geographic story," said Libby. "There are all these different markets growing at different rates."

Libby also said the drop in Toyota sales is a sign that it faces tougher prospects for continued U.S. growth going forward.

"A lot of Toyota's increases in the past were because of going into new segments," said Libby. "But that type of action is pretty much over with. They're now pretty much in every segment of the market. They're now going to have to make the gains in segments they are already in, and that's harder."

Toyota also has to protect against damage to its reputation in the U.S. market. Earlier this month, the influential Consumer Reports survey dropped the Toyota brand from first to fifth place, placing it behind Honda Motor's (Charts) Honda and Acura brands, as well as Toyota Motor's Scion brand and Subaru - in average vehicle reliability.

GM has seen even larger declines in U.S. and North American sales in the the third quarter than Toyota, as sales in both its home country and region were off 6 percent in the quarter compared to a year ago. That's partly because GM has made a deliberate effort to cutback on fleet sales, particularly to rental car companies, which in the past made up a significant portion of the sales in those markets.

A cutback in fleet sales at Ford Motor (Charts, Fortune 500) also allowed Toyota to move ahead of the traditional No. 2 U.S. automakers in terms of U.S. sales during the quarter. It marked the first time that Ford has ever dropped below the No. 2 position in terms of U.S. sales.

One thing that did not affect GM sales in the period was a two-day strike in the quarter. The company had ample supply so the short disruption in production was never a factor at dealerships.

Libby agreed with McDonald that there is limited significance to which automaker is No. 1 in global sales and which is No. 2. But he said that the fact that GM moved back in front of Toyota is a sign that it was wrong for many industry experts to write it off earlier this year because of past problems.

"GM has shown by what they've done in global sales results that they are not going to just roll over," he said. "(GM Chairman) Rick Wagoner is a serious competitor and they are not just ceding the fight. A while back, I didn't think it would be this close."