06StangAwesomecar Posted May 19, 2009 Share Posted May 19, 2009 How Toyota fell so spectacularly Exports backfire as yen rises; neglect of compact cars? Hans Greimel Automotive News | May 18, 2009 - 12:01 am EST TOKYO — In six short months, Toyota Motor Corp. collapsed from the world's biggest, most profitable car company to the industry's top quarterly money loser. The roughly $28 billion swing — from record operating profit to loss — was whiplash-fast, but the problems behind it had simmered for years. After 50 years in the United States, Toyota still imports 45 percent of the vehicle it sells there. A decade-long expansion drive added to the automaker's costs. A push to speed new models to market hurt quality, opening the door for rivals. Toyota neglected the compact cars that had made it great in favor of luxury models, large SUVs and pickups. Then it all boiled over. In January to March, Toyota's red ink outpaced the loss at General Motors, which is on the verge of bankruptcy. And Japan's No. 1 automaker warns that things will get worse. Toyota tailspin Globally, Toyota stumbled due to • Neglect of small, affordable vehicles in favor of big, expensive ones • Overreliance on Japan exports • Large exposure to exchange rate shifts • Rapid overseas expansion that added costs, strained resources • Slipping quality ratings Excess and waste "In each area, we have excesses, waste and overextension," outgoing President Katsuaki Watanabe says. Watanabe's remedy: Refocus on compact cars and hybrids. That would reverse Toyota's drift from its roots in small, low-priced cars such as the Corolla. Over the past decade, Toyota favored full-sized pickups and SUVs, as well as luxury Lexus vehicles laden with expensive features. "When the last new Corolla came out, they didn't put much effort into changing" what had been one of their most critical cars, says Kurt Sanger, an auto analyst with Deutsche Bank Securities. "Their focus was elsewhere." That shift was ill-timed. In a U.S. market collapse of 37.4 percent so far this year, Toyota Motor Sales tumbled 38.4 percent. While the Corolla and its Matrix sibling held up relatively well by slipping just 21.5 percent, the rest of the lineup dragged the total down. Imploding demand, as well as Honda Motor Co.'s low-price positioning of the Honda Fit, Civic and Insight hybrid, finally woke Toyota up. "We are determined to reduce the cost basis of our compact and hybrid vehicles," Watanabe said. Toyota priced the redesigned Prius below what analysts had expected, apparently in order to compete with the Insight. So it is already moving in that direction. But Toyota is limited in reigning in rising prices by a critical weakness. As the biggest auto exporter from Japan to America, Toyota is vulnerable to the stronger yen. The company got burned as the yen suddenly soared as much as 14 percent against the dollar in the fiscal second half that ended March 31. Toyota posted an operating loss of ¥461.01 billion, or $4.74 billion at current exchange rates, in the fiscal year. Toyota made money in the April to September 2008 fiscal first half; the losses came entirely since Oct. 1. Import reliance Automakers Nissan and Honda import from Japan 23 to 28 percent of the vehicles they sell in the United States. But Toyota sold 999,527 imports in the United States last year — or 45.1 percent of its total sales. A stronger yen trims profits from every dollar sale. In 2007, when this year's cars were being developed, a dollar bought an average ¥118 so planners could figure each $1,000 in profit was worth ¥118,000 to Toyota. At today's rate, $1,000 is only ¥96,000. Over time, that will pressure Toyota to raise U.S. sticker prices, particularly for vehicles built in Japan, such as the Prius and most Lexus models. Toyota's reliance on exports and exposure to currency risk has soared. Last year, Toyota exported about 61.5 percent of all the vehicles it built in Japan. In 1996, it exported just 35.9 percent, says Chris Richter, an analyst with CLSA Asia-Pacific Markets. "It added to the pain," he says. Moreover, Toyota expanded production at home. Toyota's capacity in Japan grew from 3.73 million units in 2001 to 4.32 million last year, says Ta-tsuo Yoshida, an auto analyst at UBS Investment Research. Industrywide sales in Japan have fallen for years so all of the extra capacity was exported. Toyota expanded even faster abroad. Global capacity jumped to 9.3 million from 6.4 million in that same period, Yoshida says. Now Toyota faces a 3 million unit gap between what it plans to sell this year and what it can build. "They weren't ready for the downside," Yoshida says. "They were expecting a 10-meter tsunami, and what they got was a 30-meter one." A push for ever-quicker vehicle development hurt quality. Recalls are up. Rivals, including Hyundai Motor Co., have caught or passed Toyota in J.D. Power and Associates' Initial Quality Study in the United States. "What Toyota really needs to be careful of is that the quality gap between it and other competitors is narrowing," says Dave Sargent, vice president of automotive research at J.D. Power. "A lot of people were attracted to Toyota because of the quality." Responding Toyota slashed global production 48.7 percent in the first quarter. In the United States, it has frozen wages, idled plants, cut hours and offered a voluntary exit program. Back home, it cut two-thirds of its 9,200 contract workers. It targets $8.22 billion in cost cuts this year. Despite the yen-driven need to build more vehicles in North America, it has delayed opening a Mississippi plant to build the Prius. Toyota says it will cancel some plants outright, but it hasn't said where. It so far has avoided drastic measures such as massive layoffs or plant closings. Even in the United States, it sidesteps forced layoffs of full-time workers. Despite the red ink, no one is talking about bankruptcy. Toyota has an ample cash cushion. Says Deutsche Bank Securities' Sanger: "They're not on the verge of a GM sickness." 'Bold change' Real change may come June 23, when Akio Toyoda, 53, takes over as president. Toyoda, the scion of the company's founding family, promises "bold change." He is stacking the boardroom with confidants, including Yoshimi Inaba. Inaba, 63, left Toyota to run an airport but was called back to invigorate North American sales and manufacturing. At his final earnings press conference, Watanabe said: "We are currently taking steps to give concrete form to our revival efforts, which include putting in place a new management structure. And with this team playing the central role, I believe a new Toyota will be born." Quote Link to comment Share on other sites More sharing options...
macattak1 Posted May 19, 2009 Share Posted May 19, 2009 Greetings, But what is there total burn and total cash liquidity I want to know? Peace and Blessings Can Ford import the Fusion there? Quote Link to comment Share on other sites More sharing options...
NickF1011 Posted May 19, 2009 Share Posted May 19, 2009 Please don't post entire articles. Post a link or I will have to close this topic. Thanks. Quote Link to comment Share on other sites More sharing options...
NickF1011 Posted May 19, 2009 Share Posted May 19, 2009 Can Ford import the Fusion there? To Japan? Only if they start making a RHD version, which seems unlikely. Quote Link to comment Share on other sites More sharing options...
macattak1 Posted May 19, 2009 Share Posted May 19, 2009 To Japan? Only if they start making a RHD version, which seems unlikely. They don't sell fusion anywhere else but the US or LH nations? Peace and Blessings Quote Link to comment Share on other sites More sharing options...
NickF1011 Posted May 19, 2009 Share Posted May 19, 2009 (edited) They don't sell fusion anywhere else but the US or LH nations? Peace and Blessings It is sold only in much of the western hemisphere, which is almost exclusively LHD (with a couple small exceptions). Of course, that may all change when Fusion/Mondeo merge platforms, since the Mondeo will continue to be offered in both LHD and RHD variants. Edited May 19, 2009 by NickF1011 Quote Link to comment Share on other sites More sharing options...
macattak1 Posted May 19, 2009 Share Posted May 19, 2009 It is sold only in much of the western hemisphere, which is almost exclusively LHD (with a couple small exceptions). Of course, that may all change when Fusion/Mondeo merge platforms, since the Mondeo will continue to be offered in both LHD and RHD variants. I just think it would neat to see a US made care (Ford) take a huge part of the Japanese market or even go to the top. I realize there are huge hurdles for this to occur. But still, I would love to see Japan's #1 selling car year after year be a fusion or Focus or something. But that would never happen as the walls would be made taller, wider, and deeper every year in Japan to prevent that from happening. But it would also be nice to see their true colors... Peace and Blessings Quote Link to comment Share on other sites More sharing options...
06StangAwesomecar Posted May 20, 2009 Author Share Posted May 20, 2009 Please don't post entire articles. Post a link or I will have to close this topic. Thanks. The article was e-mailed to me. http://ebm.e.ccialerts.com/c/tag/hBKE1xlAG...&RAF_TRACK= Quote Link to comment Share on other sites More sharing options...
Noah Harbinger Posted May 20, 2009 Share Posted May 20, 2009 Please don't post entire articles. Post a link or I will have to close this topic. Thanks. A modicum of sleuthing finds it's a subscriber-only article.... Quote Link to comment Share on other sites More sharing options...
NickF1011 Posted May 21, 2009 Share Posted May 21, 2009 A modicum of sleuthing finds it's a subscriber-only article.... Well then subscribe to view it. Isn't that the point of subscriber-only articles? So everybody and their mother can't read them for free? Quote Link to comment Share on other sites More sharing options...
Noah Harbinger Posted May 23, 2009 Share Posted May 23, 2009 (edited) Well then subscribe to view it. Isn't that the point of subscriber-only articles? So everybody and their mother can't read them for free? Calm down, Heir Göring - I was trying to suggest he should take it down. Edited May 23, 2009 by Noah Harbinger Quote Link to comment Share on other sites More sharing options...
Ford Jellymoulds Posted May 23, 2009 Share Posted May 23, 2009 (edited) They don't sell fusion anywhere else but the US or LH nations? Peace and Blessings 72 MPG RH Fusion Diesel that costs half the price of a pricy Prius hybrid that only returns a poor 65 MPG the bomb proof diesel engine in Fusion will last twice as long. Edited May 23, 2009 by Ford Jellymoulds Quote Link to comment Share on other sites More sharing options...
Ford Jellymoulds Posted May 23, 2009 Share Posted May 23, 2009 How Toyota fell so spectacularly Exports backfire as yen rises; neglect of compact cars? Hans Greimel Automotive News | May 18, 2009 - 12:01 am EST TOKYO — In six short months, Toyota Motor Corp. collapsed from the world's biggest, most profitable car company to the industry's top quarterly money loser. The roughly $28 billion swing — from record operating profit to loss — was whiplash-fast, but the problems behind it had simmered for years. Toyota tailspin • Slipping quality ratings Excess and waste Toyota posted an operating loss of ¥461.01 billion, or $4.74 billion at current exchange rates, in the fiscal year. Toyota made money in the April to September 2008 fiscal first half; the losses came entirely since Oct. 1. Toyota slashed global production 48.7 percent in the first quarter. In the United States, it has frozen wages, idled plants, cut hours and offered a voluntary exit program. Back home, it cut two-thirds of its 9,200 contract workers. It targets $8.22 billion in cost cuts this year. Despite the yen-driven need to build more vehicles in North America, it has delayed opening a Mississippi plant to build the Prius. Great news Toyota are in deep smelly stuff bigtime in Europe as well. Europes car sales YTD Jan-April Ford -8% Honda -15.4% Toyota -17.9% GM - 20% Nissan -27.9 Lexus -41.4% Land Rover - 46.4% Chrysler -56.3 http://www.acea.be/images/uploads/files/20...FINAL2-0904.pdf Quote Link to comment Share on other sites More sharing options...
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