A
light fog enveloped the Detroit area on Sept. 3, 2003, as thousands
of commuters made their way into auto plants, company offices and
industrial parks. Thanks to an early Labor Day holiday, that
Wednesday morning, for many, was only the second day back after
summer vacation. So a relaxed atmosphere was still in the air. Few
people had any sense that by the end of that late summer day, the
American automobile industry would be changed forever. By
mid-afternoon, e-mail traffic was flying thick and fast across the
country and around the world, as the August results were made
public. An email sent by Ron Pinelli, an industry analyst with
Autodata Corp. in Woodcliff Lake, N.J., whose firm tracked monthly
sales results, summed it up. It read: "The big news is that Toyota
beat Chrysler."

No earthquake could have rattled Detroit more. For the first time
since Toyota began selling cars in the United States more than four
decades before, it had taken the No. 3 position in American car and
truck sales. After the most aggressive August sales campaign the
industry had ever seen, Toyota's sales for the month topped
200,000. That was 10,000 more cars than Chrysler, whose sales had
been sliding all year, due to a stale lineup and a reluctance to
match the hefty rebates and interest-free loans that other Detroit
companies were offering. Chrysler's chief executive, Dieter
Zetsche, had dubbed such deals "automotive heroin." But without
them, Chrysler could not keep pace. And as a result, that month
Detroit's automakers no longer comprised the country's Big Three
carmakers. The lineup was General Motors, Ford and Toyota.

That was not the only bad news for Detroit companies. That August,
their combined share of the American car and truck market that
month had fallen to just 57%, a level they had not seen since 1981.
That gloomy, 50,000-foot figure was what the Detroit News chose to
make the lead of its story, splashed the next day across its front
page. But editors at the Detroit Free Press, and countless
newspapers around the country saw it otherwise. The next morning's
New York Times story, datelined September 3, began like this: "The
day that the American automobile industry has been dreading for
years arrived today. Toyota outsold Chrysler, the first time one of
Detroit's Big Three has fallen to fourth place."

The news, though monumental, was not completely unexpected. A few
months earlier, Toyota had come within about 5,000 sales of
Chrysler for that month, and it had ended 2002 as close to Chrysler
as it had ever been, less than 500,000 sales apart for the year. At
an industry conference in August 2003, David Cole, the veteran
automobile industry expert whose father, Ed, had been president of
General Motors, proclaimed that the industry in essence consisted
of a Big Two -- meaning GM and Toyota. Yet, Toyota executives,
famed for an outward modesty that camouflaged an unflinching
ambition, insisted that the company's goal was not to pass
Chrysler, only to please customers. Whether it wound up beating
Chrysler was irrelevant, as long as buyers were content, they
maintained.

Other executives in the industry, and indeed, even some within
Toyota, argued that any Toyota victory would be only a partial one.
That was because Toyota's monthly sales figures included those of
Lexus, its luxury brand, while those at Chrysler included only its
traditional brands -- the Chrysler division, Dodge and Jeep. If
Chrysler were to include Mercedes-Benz, the luxury carmaker owned
by its German parent, DaimlerChrysler, then Chrysler easily kept
its lead. But at the outset of the merger between Chrysler and
Daimler-Benz in 1998, which was meant to create the world's first
truly global automaker, DaimlerChrysler officials emphasized that
there were no plans to combine the American carmaker and the German
luxury company. They were to remain separate, with separate
marketing approaches and separate sales reports, even though GM and
Ford had always folded the sales of Cadillac and Lincoln
respectively into their monthly reports, along with those of their
other luxury marks.

When it came time to explain what happened with August sales,
Chrysler officials seemed sanguine. They certainly gave no sense of
the historic event that had just transpired and if they felt
rattled, they did not show it. "Nobody's going to question the fact
that Toyota's having a great run in the U.S. car and truck business
right now," said Chrysler vice president Gary Dilts, in what was
clearly the understatement of the day. The emphasis at Chrysler,
which lost $900 million in the 2003's second quarter, would be on
"selling cars and trucks profitably," he said. Speaking about the
event six months later, CEO Zetsche was equally blasé. "It was
much more of a media event than it was an event for us," he
maintained.

But on that September day, Toyota for once, was not modest. James
Press, chief executive of the company's American sales operations,
said the sales report was inevitable. ""This was a day that had to
happen. I'm glad it happened," said Press, who had joined the
company in 1970. But he did not predict more monthly victories in
the near future - in part because the flurry of sales had exhausted
Toyota dealers' supply of vehicles. "Next month, they may beat us,"
Press said.

In fact, Chrysler did beat Toyota in October 2003 and maintained
its lead, though often a slim one, over Toyota in the following
months. Yet that September afternoon would not quickly be
forgotten, in Detroit or elsewhere in the industry. Toyota's
victory over Chrysler was the most visible sign yet that Detroit's
long grip on the American car market had been lost. But it was far
from the only such evidence.

Excerpted from THE END OF DETROIT: How the Big Three Lost Their
Grip on the American Car Market © Copyright 2004 by Micheline
Maynard. Reprinted with permission by Currency/Doubleday, a
division of Random House, Inc. All rights reserved.