Had you attended a Texas state fair last year, you might have noticed a group of Japanese men dressed in jeans and boots, gazing at the sea of pickup trucks in the parking area. The men were from Toyota, which has been trying with scant success for years to persuade Americans to dump their Ford and Chevy pickups--the cowboy Cadillacs of the heartland--for a Toyota. Spending hours observing folks as they tailgated, hitched up horse trailers and hauled everything from plywood to goat sheds, the Japanese took copious notes, even if they still couldn't quite understand the American lovefest with the pickup. "There was a level of amazement," says Jim Press, chief operating officer of Toyota Motor Sales U.S.A.
Picture a Toyota engineer in a Stetson, munching on a corn dog, and you'll get a sense of how the company sees its future. Toyota is constructing its sixth North American assembly plant, in the heart of truck country just outside San Antonio, Texas, aiming to build the next generation of its full-size Tundra pickup there and--if all goes as planned--finally conquer the U.S. truck market. Achieving that feat would mark a milestone for Toyota in its quest to become the great American car company and would follow its conquest of virtually every other market segment, from compact cars to luxury SUVs (by way of Lexus). Indeed, the Tundra was considered so important that Toyota's entire executive design-approval committee, more than 30 members, flew to the U.S. to sign off on the final design.
Yet Toyota's truck plan illustrates not only the company's relentless drive but also the risks that accompany it. The Tundra is part of a massive increase in Toyota's global production that will have far-reaching repercussions for the firm's future and that of the entire U.S. auto industry. The history of the car business shows that bigger isn't always better: Toyota's top two rivals, Ford and General Motors, have struggled to make money despite leading in market share. Toyota, in contrast, has reeled in cash by controlling costs and focusing on vehicle quality. So is the company, in piling on capacity, inadvertently embracing a strategy that has proved perilous for its competitors? And how will the rest of the industry be affected by its initiatives? For Detroit automakers--which rely on pickups as a critical source of profit--the flood of Toyota metal spells only trouble. As Toyota president Fujio Cho told TIME, "We're expanding very rapidly." That is a diplomatic way of saying: Get ready for a showdown.
No question, Toyota's rise is the envy of the auto business. Since 1999, Toyota's U.S. market share has grown from 10.6% to 14.7%. The company makes America's best-selling sedan, the Camry. Its fuel-sipping hybrids, like the Prius, are the hottest cars on the market, commanding premiums and long waiting lists. The folks who snickered when Toyota launched a youth brand, Scion, by importing funky compacts from Japan like the xB, are racing to develop their own hipster cars. Toyota is doing a bang-up job financially, forecast to post profits of $10.8 billion in its 2005 fiscal year, according to Prudential Equity Group. The company is gunning for 15% of the global market by 2010, which would most likely vault Toyota past GM as the world's largest automaker.