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Car Forum / Toyota / Toyota Cars / May 2008Toyota feels bite of U.S. downturn
Toyota feels bite of U.S. downturn Warns of first profit fall in nine years Hans Greimel Automotive News May 8, 2008 - 2:10 am ET UPDATED: 5/8/08 8:10 a.m. EDT TOKYO - Toyota Motor Corp. racked up record results for the just-ended fiscal year. But the good news ends there. Now the world's biggest, most profitable car company is warning that earnings for the current year are poised to fall for the first time in nearly a decade. What's more, Toyota backed off its optimistic outlook for a 2008 sales increase in North America. A top executive now says his company's volume is likely to decline instead. It's a dramatic reversal from the year ended March 31, 2008. Sales, operating profit and net income hit all-time highs in that period, President Katsuaki Watanabe said May 8. But now Toyota finds itself buffeted by a triple whammy of outside forces: An unraveling U.S. market, surging raw material prices and a Japanese yen that is surging in value against the dollar. "The business environment surrounding us has changed very rapidly to become tougher," Watanabe said here while announcing full-year financial results. "Whether we can absorb these negative impacts or not will be true test of Toyota's capabilities." Slump Ahead Toyota is hardly alone. The same headwinds are lashing its domestic rivals as well. And this earnings season in Japan has been marred by gloomy outlooks. Mitsubishi Motors Corp., Honda Motor Co. and Mazda Motor Corp. have all forecasted double-digit percentage decreases in operating profit and net income for the current year. Nissan Motor Co. gives its financial results May 13. Toyota says operating income will tumble 29.5 percent to 1.600 trillion yen ($16.00 billion) in the current fiscal year ending March 31, 2009. Any downturn would be the first operating profit decline in nine years. Meanwhile, net income is expected to slump 27.2 percent to 1.250 trillion yen ($12.50 billion). That would be the first net decline in seven years. The forces fueling the downturn are largely beyond Toyota's control: . U.S. sales volume down 7.7 percent at an adjusted annual rate of 14.7 million vehicles. . Domestic steel prices that have shot up 27.8 percent between November and March. . A Japanese yen that has climbed 11.1 percent against the dollar since October. Toyota says foreign exchange rates alone will slice 690.0 billion yen ($6.90 billion) off operating profits this year. Added expenses will sap another 160 billion yen ($1.60 billion). Toyota missed its North America sales target of 2.97 million vehicles in the fiscal year just ended. It sold 2.958 million vehicles and sees a 6.4 percent drop to 2.77 million this year. For the 2008 calendar year, Toyota had been predicting a 1 percent sales increase to 2.64 million cars in the United States, despite the deteriorating market. But that too is under pressure, Senior Managing Director Takeshi Suzuki said. "We are thinking it's going to decline a little," Suzuki said after the financial results. "We are now examining the sales plan and will announce the figures soon." Good Times Gone Toyota is struggling with record high inventory levels in the United States, largely because it misjudged how bad the U.S. market downturn would be. Suzuki said the company predicted total volume in the high 15 millions, but was now working with the low 15 millions. The warning signs began to surface in the fourth quarter, from January to March, 2008. Toyota's operating profit dove 30.5 percent to 396.70 billion yen ($3.79 billion) in the period, from 570.5 billion yen ($5.43 billion)a year earlier. Net income skidded 28.0 percent to 316.80 billion yen ($3.02 billion). Yet on an annual basis, it was a banner year for the Japanese automaker. Revenues rose 9.8 percent to 26.289 trillion yen ($230.60 billion). Operating profit added 1.4 percent to 2.270 trillion yen ($19.91 billion). And net income advanced 4.5 percent to 1.718 trillion yen ($15.07 billion). All those results were company records. > Toyota feels bite of U.S. downturn > [quoted text clipped - 97 lines] > > All those results were company records. Times must be tough if Toyota can only net $12 billion - that's only $1 billion a month.  SignatureRay O (correct punctuation to reply) "Ray O" ... > "C. E. White" ... >> Toyota feels bite of U.S. downturn >> >> Warns of first profit fall in nine years *snip for brevity* > Times must be tough if Toyota can only net $12 billion - that's only $1 > billion a month. Ray snarked! :-) Natalie > "Ray O" ... >> [quoted text clipped - 12 lines] > > Natalie Every so often... SignatureRay O (correct punctuation to reply) "Ray O" ... > "Wickeddoll®" ... >>> [quoted text clipped - 14 lines] > > Every so often... A rare treat. :-) Natalie > "Ray O" ... >> [quoted text clipped - 22 lines] > > Natalie Gotta keep 'em wanting more! SignatureRay O (correct punctuation to reply) > Times must be tough if Toyota can only net $12 billion - that's only $1 > billion a month. I thought the article over stated the case as well. But you only have to look back at Ford's performance from a few years back to see how fast things can go bad. Another idiotic move like wasting billions on the Turdra and the billons in profit can turn into losses overnight. I'll bet the Toyota upper management wishes they had spent that money on more hybrids instead of a product they are practically having to give away to move off the lots. It had loser written all over it when introduced, and the Monster Turdra looks like the stupidest move Toyota has made since they shipped the first Toyopet over here many many years ago. Ed >> Times must be tough if Toyota can only net $12 billion - that's only $1 >> billion a month. [quoted text clipped - 10 lines] > > Ed I think that the point of the article was that Toyota isn't forecasting an increase in profits like they have had for the past 6 or 7 years. 15 years ago, Toyota had something like $30 billion in cash reserves, and if they stuck to their game plan, they added a billion or two every year since then. Even at $1 billion per year, the cash reserves would be around $45 billion today. Even the poor timing of the Tundra wouldn't make much of a dent in Toyota's rainy day fund, and the $15 billion they netted last year was after putting incentives on various vehicles, including the Tundra, and spending R&D money to develop a hybrid system for every series vehicle. Toyota's upper management is ultra-conservative, and that has gotten them through previous downturns in the economy in a better position than its competitors. Since Toyota is starting this downturn in such a good cash position, I suspect that Toyota will come through this downturn in better shape as well. SignatureRay O (correct punctuation to reply) "Ray O" > "C. E. White" ... >> [quoted text clipped - 30 lines] > position, I suspect that Toyota will come through this downturn in better > shape as well. I'm no industry analyst, but even I can see the simple logic in Toyota's recent successes. They were selling the right thing at the right time, and reaped the profits from same. Further, though I know this'll make some folks here crazy, people simply don't need to buy a new Toyota as often as they would some other brands (even foreign brands; I'm not saying just domestic). I might have gotten a new car, if they dollar were stronger; my daughter is disappointed that she won't be getting my Echo, since my son got hubby's FX-16 at about her age. (there, there, Hachi). As it stands, not only do I not want another car, I just don't need it. My Echo is a workhorse that shows no signs of eminent demise. Natalie Any account will tell you, keeping ANY new vehicle longer than four years or 60,000 miles, is not a good idea! Because of the amount of capital as well as the cost of acquiring that capital, needed to maintain a vehicle any longer and the capital needed to replace that rapidly depreciating asset, any perceived saving are negated. When "cost" of loss of use is factored in, the loss is even greater. > "Ray O" >> "C. E. White" ... [quoted text clipped - 46 lines] > > Natalie > Any account will tell you, keeping ANY new vehicle longer than four years or > 60,000 miles, is not a good idea! An account? What kind of account? A bank account? A Netflix account? In your case, I would think by account you mean the local bar tab. Perhaps you met Norm Peterson. > Because of the amount of capital as well > as the cost of acquiring that capital, needed to maintain a vehicle any > longer and the capital needed to replace that rapidly depreciating asset, > any perceived saving are negated. What capital is required to keep an old car? If something breaks down, of course it will cost money to fix the car. But not more than a new car. The cost of maintaining a car for eight years is not much more than the twice the cost of maintaining a car for four years. Cars are dependable these days. After eight years, an average car would have about 120,000 mi on it. There might be some repairs needed, like new brakes, maybe a wheel bearing or CV joint, but nothing like the difference in price between a new car and what one would get from a trade-in. At some point, it will be cheaper to buy a new car than keep and old one running. And, with newer safety features, safer, too. When it is worth replacing an old car with a new car depends on the circumstances. However, the time is certainly more than 4 years. There are other costs associated with buying a new car, like higher insurance premiums and registration. > When "cost" of loss of use is factored > in, the loss is even greater. What loss? I have had a 1997 Ford Contour for about 11 years. So far, the only loss of use I had was when the car was front ended and needed some body work (a small bus backed into the car). And that was covered by insurance. Jeff >> "Ray O" >>> "C. E. White" ... [quoted text clipped - 43 lines] >> >> Natalie If you had a problem figuring it was accountant, then there is no way you can figure out capital costs. I would not even try to explain it to one such as you, who apparently has never taken and economics class or ever owned a business. LOL >> Any account will tell you, keeping ANY new vehicle longer than four years >> or 60,000 miles, is not a good idea! [quoted text clipped - 27 lines] > > Jeff > If you had a problem figuring it was accountant, then there is no way you > can figure out capital costs. Considering the low thinking ability you have, I will not guess what you mean. Your thought processes are too messed up for me to even to guess what you mean. > I would not even try to explain it to one > such as you, who apparently has never taken and economics class or ever > owned a business. LOL What another great comeback! You should print it out. What your comeback tells me is that you have no clue what you are talking about as usual, and you are unable to explain how spending more money on a new-car loan or lease every four years is cheaper than just using a car one already owns. In other words, it shows you are clueless as usual. You are, however, good for laughs. Jeff >>> Any account will tell you, keeping ANY new vehicle longer than four years >>> or 60,000 miles, is not a good idea! [quoted text clipped - 25 lines] >> >> Jeff Ya right >> If you had a problem figuring it was accountant, then there is no way you >> can figure out capital costs. [quoted text clipped - 50 lines] >>> >>> Jeff > Ya right Another brilliant comeback by Mike Hunt! Jeff >>> If you had a problem figuring it was accountant, then there is no way you >>> can figure out capital costs. [quoted text clipped - 48 lines] >>>> >>>> Jeff > Any account will tell you, keeping ANY new vehicle longer than four years > or 60,000 miles, is not a good idea! Because of the amount of capital as > well as the cost of acquiring that capital, needed to maintain a vehicle > any longer and the capital needed to replace that rapidly depreciating > asset, any perceived saving are negated. When "cost" of loss of use is > factored in, the loss is even greater. So why did you keep the Pinto and Lincoln? SignatureRay O (correct punctuation to reply) Because they are two of my collector cars, not daily drivers. My two daily drivers are turned over in two years. I buy a new car every year and sell of the two year old car. I currently have a 2008 MKZ and a 07 Mustang GT convertible, but my 09 will be here in around three weeks. ;) >> Any account will tell you, keeping ANY new vehicle longer than four years >> or 60,000 miles, is not a good idea! Because of the amount of capital [quoted text clipped - 4 lines] > > So why did you keep the Pinto and Lincoln? > Because they are two of my collector cars, not daily drivers. My two daily > drivers are turned over in two years. > > I buy a new car every year and sell of the two year old car. I currently > have a 2008 MKZ and a 07 Mustang GT convertible, but my 09 will be here in > around three weeks. ;) Good for you. Just because you do this does not mean it is a good idea. Jeff >>> Any account will tell you, keeping ANY new vehicle longer than four years >>> or 60,000 miles, is not a good idea! Because of the amount of capital [quoted text clipped - 4 lines] >>> >> So why did you keep the Pinto and Lincoln? > Because they are two of my collector cars, not daily drivers. My two > daily drivers are turned over in two years. I'm just bustin' your chops ;-) > I buy a new car every year and sell of the two year old car. I currently > have a 2008 MKZ and a 07 Mustang GT convertible, but my 09 will be here in > around three weeks. ;) I'm surprised you don't wait a few months for the MKS - looks sharp (IMO, better looking than the MKZ), more real estate surrounding you, with comparable fuel economy to the MKZ. SignatureRay O (correct punctuation to reply) Perhaps, but the toyopet at $790 was a much better buy LOL >> Times must be tough if Toyota can only net $12 billion - that's only $1 >> billion a month. [quoted text clipped - 10 lines] > > Ed
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