New Year’s Greetings from Toyota’s President

1. It’s great to see such comments in public, it shows how much Toyota cares for the complex system they are being part of:-)

   To my knowledge there is nothing similar from the German car makers on hand;-(

   Best

   Ralf

   Reply

2. GM’s message from Rick Wagoner:

   2 January 2008

   What do we need to focus on in 2008?

   I think there’s going to be several economies that look like they’re going to be more difficult or continue to be rather difficult. The U.S. comes to the top, actually the auto market demand in Germany was quite weak in ’07 and looks like ’08 might also be a little bit tough. So these are two very, very important markets for us. It’s important to remember, a whole lot of other markets out there are doing very well and our teams are running like crazy to keep up with the demand and delivering a kind of record performance – whether it’s revenues or profitability or cash flow. So because our business is most heavily weighted in our traditional markets like the U.S. and Germany, it kind of casts a direction on our performance which feels a little bit heavy and sometimes a little bit of a negative headwind, but it’s important to keep in mind that we’ve got a lot of people who are driving in successful markets and doing just what we want them to do.

   So I’d say the first priority for next year is to stay focused on the growth opportunities and continue to grow our position, particularly in the emerging markets. Second priority – we’ve built a good focus on product excellence, great cars and trucks that build great brands – we need to keep building that in every product that we execute. Just not accept a standard other than that we want to have the best product in our segment. And particularly, we’ve been talking over the last year or so, let’s do an even better job and use those great cars and trucks to build great brands.

   So it’s not that we just want a great car, we want a great Chevy Malibu that builds a Chevy brand. A great Opel Corsa that strengthens the whole Opel lineup and Vauxhall. And so again, I think progress there, but more to do.

   Third, we need to continue to work on our structural costs. And we really see this in some of the developed markets, that when we lose revenue it puts a huge amount of pressure on our bottom line because our overall cost structure is still relatively fixed and relatively high. So, for example, here in the U.S. we have some opportunities as a result of the 2007 labor negotiations to add in some flexibility and lower costs to our workforce, and I think you’ll see us working hard on that in the early part of ’08. I think it can be done in a way that’s very appropriate and fair to the workforce – those involved – and also sets up the company to be more cost competitive. Maybe not a huge amount in ’08, but a lot beyond that.

   The other two areas I’d mention: a lot of attention around fuel economy, around the whole world. We read it every day in the U.S. , we read it in Europe, we see it in China . Almost every place is talking about improved fuel economy, less reliance on oil, concern about CO2 emissions… we need to play a big role in the solution. We’ve got some great ideas, great technologies. They do cost a little bit of money, and in some cases cost a lot of money so we have some work to do, but we need to keep those plans, strategies, technologies on track so we’re able to bring them to market and meet society’s expectations in this whole area of less petroleum usage and reduced CO2 emissions.

   The last thing I’d ask everybody is to renew our commitment to excellent quality. I think we’re all proud. In almost every market I see around the world we’ve shown improvements if you look back over the last decade, over the last five years in our quality performance, particularly in sort of first, lower problems and initial problems. And we’ve been focusing more on excellent interiors and what we call perceptual quality…and even more recently a lot of focus around reliability and durability. What’s clear to me is that quality is the kind of thing where if you’re not moving forward on it, you can slide backwards and the other thing that’s clear is that quality is a team sport. I’d really like everyone, no matter where you are, to make sure to renew your own personal commitment to an excellent quality focus. And I think if we do that we’ll support the great products, great cars and trucks initiatives with a constant raising of our capability in quality.

   We’re making better quality products than we’ve ever made before, yet there seems to be a stubborn perception issue among consumers that we must still deal with – what are your thoughts?
   Consumer perceptions are formed over a long period of time and generally based in fact, although sometimes things can kind of run out beyond reality. For example, we’ve seen here, just commenting on the U.S. , the image that we weren’t very good on fuel economy. The fact is, if you look at the number of products we offer that get greater than 30 miles per gallon on the highway, it’s more than any other manufacturer. So we began to systematically talk about that in our advertising and educate the public. And lo and behold, it all feeds back: one of the top five reasons to purchase a GM car now is fuel economy. So first of all we have to execute. We have to have great quality, you know, stunning design, outstanding fuel economy, great value. And then we have to do our job in getting the word out. So sometimes that’s conventional advertising, sometimes it’s people like me going on TV shows or interviews to talk about it….a lot of our work has been on internet digital marketing. People who are in the purchase funnel, make sure we’re there when they’re looking for data. So those are the kinds of things that we need to do. You know frankly, we’ve done a good job in many parts of the world, some places we’ve done a systematically superior job. Again, it’s an area where we can learn from each other.

   Energy diversity is an idea you’ve touched on many times – what are your thoughts on our role in this topic?

   I read the paper here every day and it’s like the headline, so it does show us kind of the tone out there. And you know I think if we were reading the newspapers in Germany or Switzerland or reading them in China or India, this is a topic of interest to everybody and I think if you just start out with the fundamentals – we’re selling a lot more cars and trucks this year – ’07 is the sixth consecutive year of record industry sales with 70 plus million units, so that’s up 12 million units over the last six years. If we look out the next five years, we think that growth could actually accelerate to 85 million cars and trucks sold. Well, more cars and trucks sold is an opportunity for us, but it means more people consuming energy. Obviously there’s been a lot of focus and attention on CO2 emissions and people raising concerns about the concept of global warming, so I think it’s created an environment, a political environment, where more and more people are focused on this sort of genre of topics. As a result, they’re looking for our industry to play a big role in reducing the amount of petroleum we consume and reducing the amount of our emissions. And I’d say it’s our time to really step up. Now, it’s not the only time in our history that we’ve been faced with this, but for my sense in it, I would say that in my GM career this is the greatest degree of intensity and consistency. So it’s clear we’re in a different time. The good news for us is that we’re well positioned to confront the range of issues that we just talked about by focusing on what we call energy diversity. We have a great position in biofuels in places like Brazil and now the U.S. where we’re producing E85 or E100 in Brazil capable vehicles.

   Second area – we continue to improve the efficiency of our gas and diesel engines and our transmissions as well. So we can kind of do the day-to-day work and we’re doing a lot of work on reducing vehicle mass so we can improve fuel economy. Third we’re bringing out technologies, like hybrid technologies which significantly improve fuel economy – at some cost, I have to be candid – but obviously an area that we’re going to continue to exploit and develop. We’ve done a lot of work on fuel cells, hydrogen fuel cells and talked to a lot of people about that over the years and continue to make progress. In fact, now we’re in the process of ramping up a 100 unit fleet of fuel cells as we get closer and closer to the day that we’ll actually be able to produce those for the general public. And I think most recently a lot of attention is focused on electrically driven vehicles – we call them extended range electric vehicles. And again, as I mentioned before, probably no vehicle in my GM career has created the excitement that the Chevy Volt has. Here, and around the world. And you know the whole idea of really harnessing the power of lithium batteries and combining that with a small alternative propulsion system to give you the benefit of both electrically driven vehicles for a 30 to 40 mile range, let’s say 40 miles, and then an extended range if necessary powered by these alternative propulsion systems is really a breakthrough and exciting idea. So we’re working on all that stuff and I think we’ve positioned GM as someone who can compete, a really can-do company, and we’ve got some really great technologists, engineers, scientists working on all this stuff and some are coming into production.

   I think our big challenge, to be honest, is making sure that we stick on our strategy to roll them out even though times might be a little bit tougher, which we’re going to do, and we also have to make sure the rest of our business is very robust and profitable and generates cash. Because, for awhile, these are going to be investments in the future. They’re not going to have great, sort of traditional profitability models. We have to invest today to get returns five and ten years down the road and so that means the rest of the base business really needs to run more profitable and generates more cash than maybe what we expected awhile ago. And so everyone plays a role in our ultimate success in this area, but if we get it right, we really have a chance to establish, globally, or re-establish in some cases, an image of GM as a technological powerhouse. A true leader in an area where someone needs to lead the industry. And I think our position, I think the opportunity is there for us – what we have to do is execute it now.

   How well are we acting as a global organization and where do we have opportunities to improve?
   I think again, this is an area that’s fun to watch. When we first started on this journey I don’t think we exactly knew how long it would take. We had some ideas on how it should work, but it’s fun now being several years into it to see as I travel around. You go to Asia and people are excusing themselves to go on the global phone calls related to product programs or design or the global purchasing team. A lot of times now I go to plants anywhere in the world they have common metrics and they measure themselves and learn from other plants and take their best ideas and share them with plants in other countries and locations. So I see a lot of momentum there. I see a lot of momentum in the development of our management structure, where we’re having more people with diverse backgrounds and diverse work experiences moving up and you know I think that helps us become a more global company. And sort of the, “what is the strategy of the business, what are we working on, what kind of culture are we trying to create?”

   I would say again, as I talk to different people in different functions – whether it’s when I visit or when I do webcasts/webchats, which I do periodically, or diagonal slices when I’m visiting various parts of the world – I feel like the momentum is really positive. I mean, having said all that, there is still more we can do. I mean, we haven’t figured out how to get everyone in the world on the same time zone so….this aspect of being able to work as we need to in global teams but do it in a way which respects people’s lives outside of work and outside the normal work window is still a little bit challenging. And I think we’re getting better at how we can communicate more effectively and in a way that fits in better with people’s work days. I still think we have work to do in some functions in making sure we truly drive the global principals, the best practice sharing.

   The last thing I’d say is we really want to create an environment where everybody around the world feels like they can contribute. If they do so and add value they have a chance to get ahead. And I think we’ve made progress there, but we can always do more and it’s an area where I particularly have a lot of interest in us continuing to progress.

   We’ve now entered the year when GM starts its second century. How important for us to be number one in global sales when we hit that mark?

   Let me first talk about the centennial. I mean, it’s not too many companies that make it to 100 years old so I think everyone in the GM family, both current employees and prior employees, should feel good about their contributions to enable us to stay in business that long. Having said it, that’s all history, and a lot of the focus of our centennial celebration is on the future. We purposely called it GMnext because we wanted to spend some time honoring our past and those who’ve contributed to the past really made the auto industry what it is today – but we want to spend a lot of time looking forward, and talking about our vision for the auto industry for the next 100 years and what is GM’s role in that. So I think it should be a year that gives us all a chance to celebrate our past but also think a lot about our future and what we all can do. In that context, I would love for us to continue to remain the number one manufacturer. And I think, as you know, through the latest data, it’s a real horse race between GM and Toyota . If we don’t win, the sun will come up the next day, or if you’re in Detroit , it’ll be snowing when you get up the next morning, but we’ll keep going and we’ll come back to work and that’ll be an inspiration for us to even work harder. And we’ll just fight to get it back next year. My preference would be to win, and to keep winning, because I’m competitive like everyone in the GM team. We know we’ve got great products, we’d like to keep the number one position. But we’ve got to run our business the right way.

   So for example, in the U.S. , in Europe, in Canada , we’ve actually reduced our daily rental fleet sales, which may in the end cost us this “championship,” or the so-called championship as the media would talk about it, but it’s the right thing to do for our business. Both short- and long-term. So we do make some calls that would suggest that we have to be smart and recognize that we’re running a business to be successful both at the top and bottom lines and so we make trade-offs there. But in the end, you’ve got me figured out. I really do hope we stay on top.

   What were our most significant accomplishments in 2007?

   A couple of things immediately come to mind. We really have continued to advance the ball very well this year in the execution of our new products. And whether it’s products like the Chevy Captiva, the Saab 9-3 BioPower – or here in the U.S. the just launched CTS and now the Chevy Malibu – boy, the reaction from the press and the public has been just terrific. So I think that’s the most important thing we can do in our business. It’s great to feel that momentum and the fact that we built on it in 07.

   Another important area of progress, and a really notable achievement this year is the excellent growth in a lot of the emerging markets. South America was very strong for us, we did a terrific job. China continues to be just a powerhouse in growth and we continue to do well there. We’ve got some good momentum going in a place like India , which has such potential for us, and I obviously need to mention Russia where we just did a great job in a very strong market. But I think that really shows that our teams around the world are taking advantage of aggressive growth when the market opportunity presents itself. Third, I’d certainly have to mention the accomplishment in completing the UAW contract negotiations here in the U.S. This was really a breakthrough set of negotiations. A lot of different kinds of things coming out of it addressing some tough challenges and I think conducted in a very professional way on both sides. It has a chance to dramatically change the future opportunities for our business to be competitive here in our still-largest market, the U.S.

   I don’t like to just restrict it to three, there are a lot of things, but certainly those three come to the top of my mind.

   How is our progress with the North American turnaround plan?
   In so many ways I think everyone should feel good that we executed the plan that we laid out…great products – and I just talked about those. Should also mention a lot of investment in new technologies, for example, the two-mode hybrid has just got some great coverage, and the concept Chevy Volt as well. Another achievement is changing our sales and marketing strategy to focus more on product and brand, and less on lower profit sales like daily rental sales and improving residual values. The top four or five reasons for purchase have changed from a sort of price and deal focus to product design, value for money, fuel economy, quality and durability, so we see that really working in the sales and marketing side of the business. And then we talked about the importance of getting our costs more competitive, and over the last couple of years we’ve cut out $9 billion of structural costs in North America . That’s quite an accomplishment, and really a reflection of great teamwork by literally everyone here and from some outside the U.S. and North America who pitched in to help as well. We appreciate all that. So from that perspective, kind of executing the plan we set out and including obviously the changes in the post-retiree/health care expense.

   I think people can really say we faced some mountains and moved them actually pretty well. Maybe the downside to this is the U.S. market and economy is actually pretty weak now, probably weaker than when we started a couple of years ago actually. And I think it’s fair to say as we sit here today that there’s a little bit of anxiety about where the economy is going to go in the U.S.

   So, frankly, more headwinds than I had hoped we’d be facing, but I think, you know, all of the members of the GM team around the world, and I think particularly here in North America , can take a lot of comfort that we took on some tough challenges. Everyone did, and really made phenomenal advances. So if we have a little more headwind we just need to use the confidence that comes from those kinds of achievements to drive us to the next level. Eventually the U.S. market will come back, and when it does, we’ll be, I think, even better yet positioned for that.

   Any final thoughts to our team around the world?

   The most important thing I can do is thank everybody, around the world, the whole GM team. By the way, I should include our extended team members, our dealers, who just do a great job for us around the world. We also have great support from our unions who work closely with us…our supply base who’s been under challenging times as we have in other parts of the world as well. And we’re fortunate to have that kind of support. But my primary thanks go to everyone on the GM team around the world – whether you’ve been in a market that’s booming so your whole year has been focused around “Gee, how can I build more cars and trucks to supply the strong demand in our market in high quality” or you’ve been in a market that’s been a little tougher so you say “Gee, how can we save some money so we can keep investing in the future even though we’re not getting the revenue that we’ve planned on.” Each one of those circumstances and every circumstance resulted in individuals facing challenges and I’m really proud of the fact that our team has, whether things are great or tough, they stay focused on the essential tasks at hand and stay focused most importantly on great cars and trucks, leading edge technology, addressing the things we need to address to be competitive and win long term. And boy, people never cease to amaze me with the amount of time and effort they put into their jobs and how constructively they work with their colleagues. And I think all that contributes to giving GM a different culture than a lot of companies. It’s a culture that I’m certainly proud to be a part of — it gives us a competitive advantage over the long term.

   So the most important message is thanks for your hard work in ’07. In some cases the results have exceeded expectations. In some cases, not as good as we’d hoped for, due to market conditions or others. But as far as the fundamental building blocks to build a great company for the future, I think everyone should feel proud that we made good progress in ’07 and we’ve got some momentum in important areas that even with some headwinds in places like the U.S., and perhaps other markets, we can keep building for the future as we go into ’08.

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