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Since the woes in the financial industry spread to the real economy, there’s hardly a sector of the economy that is unaffected. While the American car makers GM, Ford and Chrysler have been struggling from the very beginning of this crisis, even Toyota (9.23 million cars produced in 2008) which surpassed General Motors (8.15 million cars (2008)) in 2008 as the world’s biggest auto maker is now hit hardly. Though many expected that Toyota were rather resistant, it’s no big surprise that the Japanese car company is facing it’s first net loss since the company started making cars in 1937. Toyota is the market leader in an industry that is struggling to survive. In the big consumer markets in North America and Europe, car sales have plummeted by double digits in recent months. In the U.S. alone, Honda’s sales fell 28 percent from January 2008, Toyota’s sales are down by 34% and Ford’s sales are down by roughly 40%. The world’s largest maker of luxury cars - the Munich-based BMW Group - announced that its sales fell by 24%, Mercedes-Benz said its sales worldwide are down by 31.2%. In Japan, Toyota’s car sales are down by 24% compared with January 2008, in China, the company’s sales numbers remained stable, but profits have declined.

Consequently, Toyota expects a $3.9 billion operating loss in the 2008 fiscal year ending on March 31. In the final quarter of 2008 alone, the company lost $1.8 billion. Currency exchange rates can be blamed for a loss of $2.7 billion. The Japanese Yen has gained decisively in value against the USD and the Euro since fall. This lowered overseas earnings, harming Toyota’s cost-competitiveness.

A few weeks back, Toyota announced that the grandson of the company’s founder, Akio Toyoda, will become the new president in June when Katsuaki Watanabe steps back and becomes vice president. In 1938, the founding fathers changed the name from Toyoda to Toyota which is written with eight brush strokes which is a fortunate number in Japan. Toyoda is expected to turn the company inside out. While Toyota has earned big bucks with SUVs like the Toyota Sequoia, which outnumbered fuel efficient hybrids by far, the company will focus even more on more efficient hybrid and electric cars in the future.

 

 

 Despite the tough times that lie ahead for the entire auto industry, Mr. Toyoda is optimistic that Toyota will remain the strongest car maker in the world. In December, he said that cars that we will be driving in 25 years from now need to be developed today. Undoubtedly, cars in the future will be fundamentally different from today’s. Even by comparing today’s cars with the ones that were built in the 1980s, the differences are outstanding, even though the technology used to run cars hasn’t changed in decades. By contrast, as soon as ten years from today, it’s unlikely that there will be a lot of new cars with combustion engines anymore. Furthermore, Toyoda said that if Americans continued to replace their cars at the same pace they’re doing now, they would have to drive their cars for 25 years which is very unlikely. For sure, auto sales will recover in the medium term, though it’s simply not possible to predict when this will be the case. Mr. Toyoda is determined to make sure that Toyota will have brought it’s alternative fuel propulsion technology to perfection until the auto market recovers. By that time, Toyota’s completely new car models can go on sale in large numbers.

By Japanese standards, Mr. Toyoda is a fairly young executive. He made his MBA in the United States and speaks English fluently. He had already served as a vice president forming a joint venture with General Motors. In recent years, he has overseen Toyota’s operations in China. 

The crisis in the auto industry is unprecedented in magnitude and possibly duration. However, the reasons for the buyer’s reluctance in the U.S. and in Europe are different. While in America less cars are being sold since there’s no more financing available and debt-loaden families can simply not anmyore afford buying a new car, European consumers lack of confidence in the future economic development and refuse to make any major purchases though they still have savings.

In spite of the grim outlook for the auto industry, Toyota is willing to maintain it’s culture of lifelong employment. So far, the company has only laid off temporary workers, keeping its permanent work force.

Nevertheless, the Aichi prefecture in Japan where Toyota’s headquarters is located, is facing an enormous budget deficit since tax revenues vanished and failing part suppliers are slashing jobs. While Toyota reduces its excess capacities and postpones the construction of new assembly plants, that result from an expansion of its production in recent years,  a cut in production by 10,000 units means that the company will need 40,000 tires less and so on…

In the short term, new product lineups should help stabilize demand. Later this year, a new version of the popular Prius hybrid car and a hybrid model of the Lexus luxury brand are scheduled to go on sale in the U.S.

An outstanding example is the new Toyota IQ which is already on sale in Japan and Europe:

IQ commercial:

This microcar should take on Daimler’s Smart. However, the IQ has four seats while the Smart ForTwo only offers space for two persons. Of course the IQ meets all security standards and is equipped with everything today’s car buyers expect. To keep up demand although Toyota’s thirsty SUVs became unpopular, the IQ has great fuel economy and very low CO2 emissions. The engineers managed to maximize the limited space in this small car made for congested urban areas. Toyota might exceed the projected 100,000 sales of the IQ in 2009. The IQ could go on sale in the U.S. either late this year or in early 2010. Possibly, Toyota might introduce an electric version of the IQ someday. For more information on the IQ: http://consumerguideauto.howstuffworks.com/2010-toyota-iq.htm

To cope with the crisis, production will be halted in Toyota’s Japanese plants for 11 days in February and March. Toyota intends to cut costs by 10% to brave the expected $5 billion operating loss in 2009. Regardless of the attempt to cut costs, the company will even increase its spending on research and  development. This long-term thinking will likely turn out to ensure that Toyota will be earning lots of money again, once this crisis is over.

http://www.bizjournals.com/albuquerque/stories/2009/02/02/daily29.html

http://www.bizjournals.com/dayton/stories/2009/02/02/daily70.html

http://www.nytimes.com/2009/02/07/business/worldbusiness/07toyota.html?hp

http://www.freep.com/article/20090207/BUSINESS06/902070367/1019/Toyota+expects+to+lose+$3.85+billion

http://seatbealt.blogspot.com/2009/02/toyota-first-global-sales-decline-in.html

This entry was posted on Sunday, February 8th, 2009 at 2:59 PM and is filed under Economy, Electric Cars & Auto Industry. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.