SUZUKI ABOUT TO OVERTAKE GENERAL MOTORS

The news world is blathering about Toyota being poised to pass General Motors and become the world's largest car maker.

It's true. But that's just in worldwide sales, a meaningless number.

Even though both companies make oodles of cars, Toyota makes billions of dollars in profits on its sales, while GM loses billions of dollars on its sales. Sales is a poor measure of corporate size because it does not take into account profitability, growth, capital management or other indicators of corporate health.

A far more important measure of leadership is "market capitalization" -- or what a company is worth on the stock market. According this measure, GM is worth only $12.7 billion while "much smaller" Hyundai is now worth $20.4 billion. How can sales be an important measure of size when Hyundai is worth 60% more than GM even though its sales are 74% less than GM's?

Tiny Suzuki, whose sales are a mere 11% of GM's sales, is now worth $10.5 billion and is poised to pass GM sometime in 2006.

In company worth, General Motors has been passed up by a whole host of auto makers, including Honda, DaimlerChysler, Nissan, BMW, Volkswagen, Audi, Ford, Hyundai and of course, Toyota.

It may be shocking to you, but General Motors is now only the tenth largest auto company, as measured by size of its market worth.

Toyota may be about to scoot by GM in sales but it leaped past the American giant in market capitalization years ago. At this time, Toyota is worth 13 times more than General Motors. Put another way, if you could afford to buy one Toyota Corporation, you could afford to buy 13 General Motors Corporations. If this were "Monopoly," Toyota would be a luxury hotel on Park Place and General Motors would be "jail."

"Market Capitalization" is a concept which takes into account growth as well as sales and profits. In some ways, a corporation is much like a biological organism. A growing organism has a future; a shrinking organism does not, and is therefore less valuable.

Toyota is a steadily growing corporation, increasing its share of the auto market in every country in the world. General Motors, on the other hand, is a shrinking organism, losing market share almost everywhere. In the USA, GM has dropped from 50% market share down to 25%, an indication of a dying corporation.

Two years ago, a financial analyst completed a "capital usage" study of the auto market. He concluded that companies like Toyota and Honda were "capital constructive," while GM and Ford were "capital destructive." To an investor, it meant that buying General Motors and Ford stock was like throwing good money after bad.

When the press claims that GM is the largest auto company, it's kind of saying that an aged, dying elephant is bigger than a young, healthy lion. It may be ... but which one is really the king of the jungle?