Over the last year, shares in Toyota (TM) are down well over 20%. The fact that GM (GM) and Ford (F) have fallen makes sense. They are still losing market share in a shrinking US car market.

Toyota has problems, but they are relatively less visible than they are at US car companies.

The big Japanese car company says it is increasing vehicle production 5% in 2008 to 9.85 million. But, inside those numbers, sales in it home market will be flat and overseas sales will be up 10%. Neither of those forecasts may work out.

Fuel prices in Japan are among the highest in the world. It does not have an significant supply of its own. It is at the mercy of global crude prices. If gas costs are higher next year, the Japanese consumer may just decide to keep his car until 2009 instead of spending a lot of money on a new one.

Toyota faces a similar problem outside Japan. Rising fuel costs in the US and Europe could actually drive car sales to negative growth in 2008. Toyota would then have to pick up substantial share to keep its forecasts.

Toyota is now up against competitors who have become desperate, especially in the US. That means better cars from American manufacturers and the potential of much higher incentives. Toyota cannot count on its reputation to offset a car price war in the US.

And, Toyota is the victim of its own success. As it builds manufacturing facilities around the world, it is less able to oversee quality control from Japan. The reputation of its cars has slipped in several recent surveys and it has had several recalls over the last 18 months.

Being No.1 in global cars sales may not be as nice a spot as Toyota had hoped it would be.

Douglas A. McIntyre

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