By on November 6, 2008

Automotive News [sub] reports that Toyota’s profits took a dive in Q3, as sales in its North American and European markets dried-up and blew away. “North America slumped to a $335.9 million operating loss in the April-September fiscal first half. Sales there slid 9.4 percent to 1.357 million vehicles in the period. For the full year, Toyota lowered its ambitions 2.420 million units, an 18.2 percent fall off.” Bottom line? “Toyota now expects global operating profit to plummet 73.6 percent to 600.0 billion yen ($5.83 billion) in the fiscal year ending March 31, 2008. Just three months ago, Toyota had forecast operating profit to decline a comparatively modest 29.5 percent to $15.5 billion. The new goal would be Toyota’s lowest operating profit since the company began calculating in U.S. accounting standards in 1998.” But it is, let’s face it, a profit. If GM and Ford report similar revenue drops tomorrow– and why wouldn’t they be worse?– excrement and air movement device will collide. (As everyone and their mother are predicting.) Meanwhile, back to Toyota…

“This is an unprecedented situation,” Executive Vice President Mitsuo Kinoshita said whilst delivering the results. “Every week, the environment gets worse.” Kinoshita reckons the global car market– and thus Toyota’s profits– won’t rebound until late 2009. “At the earliest.” Needless to say, it’s all hands on deck at ToMoCo. “Watanabe is now chairing an ‘Emergency Profit Improvement Committee’ [EPIC?] charged with staunching the bleeding and making sure Toyota stays in the black for 2009 and 2010. Details are scant, but the committee will review everything from pricing to product pipeline.” I wonder if they run a fleet of Gulfstreams or pay their CEO $15.5m a year? No, didn’t think so…

Get the latest TTAC e-Newsletter!

34 Comments on “Toyota Profits Plummet 73.6%...”


  • avatar

    At least they still have profits …

  • avatar
    obbop

    “Toyota Profits Plummet 73.6%”

    Sorry, I can not accept that specific figure just because it was placed within an article.

    I would accept, however, 73.3%.

    When will the reduced sales lead to some significant decreases in sales proces at the dealerships?

    Is Toyota still getting “top dollar” based upon perceived quality in the minds of many consumers?

    Enquiring mindlets wanna’ know.

    Still miss my ’72 Plymouth Duster with the front bench seat, 225-slant six motorvator and the awesome old-fogeyish three-on-the-tree.

  • avatar
    gamper

    Yikes.

  • avatar

    The operative sentence is: “But it is, let’s face it, a profit.” #3 Volkswagen will also end the year with a profit (dismal sales in the US turning into a blessing …)

    GM and Ford will report much bigger revenue drops, due to greater exposure to US market. Also, as opined here, there are people who stay away from D2.8 because they are worried that they might not be around, if so, who’d be honoring their warranty etc. Bigger dent. Profit no issue. There is none.

    Also a problem: “Aside from shriveling U.S. demand, Toyota is also getting hit by a rising yen. The yen has gained nearly 12 percent against the dollar since August, reducing the value of dollar-denominated sales when converted back into Toyota’s home currency.” The Euro dropped a lot. Affecting their EUR numbers even more. Helping VW.

  • avatar
    altoids

    Profits drop 73.6% and they still make 5.83 billion dollars?

    If I were Toyota, I’d be buying back some of my dirt-cheap Toyota stock…

  • avatar
    psarhjinian

    The operating loss in North America is troublesome, moreso if it becomes a permanent fixture.

  • avatar
    autonut

    @ obbop
    Perception is reality. In Germany Toyota ranked higher in quality then all of domestic auto manufactures. Considering nationalism in Germany, I would call Toyota quality a reality. Granted, there are a lot of posts describing quality issues with Toyota, including large amount of recalls. But who did statistical analysis on their volume of vehicles on the road vs. defects? BTW, I drive their product and it is much worse then Honda in my mind, but Honda produces 20%-30% or less of Toyota volume and range of products is just astronomical.

  • avatar
    tulsa_97sr5

    I’ll be honest, this news made my morning. Watching TM and HMC closely, trying to decide where exactly I buy some of each.

  • avatar
    1996MEdition

    Is that a Dr. Evil chair?

  • avatar
    Liger

    Is Toyota still getting “top dollar” based upon perceived quality in the minds of many consumers?

    If you’re referring to Toyota’s selling for full MSRP, then no Toyota’s are not selling for top dollar. In most markets, I don’t think they ever have. Except for maybe the Prius. In the Kansas City market at least, competition is fierce and Toyota’s generally sell for invoice or less. Most Honda’s, Lexus and perhaps Mini and Smart sell for sticker (up until recently at least), but everything else is extremely negotiable.

  • avatar
    psarhjinian

    Is that a Dr. Evil chair?

    Davros

  • avatar
    B-Rad

    This makes me wonder what kind of cash Toyota has laying around just in case they can’t stay in the black sometime in the next couple years, whether overall or just in EUR or NA?

  • avatar
    ronin

    Turnaround in late 09? 12 months and then everything is okey-dokey again? Why? What exactly is there in the environment that gives a shred of evidence to this prediction?

    I would be more inclined to believe them if one year ago they had predicted their profit would decrease by 73.6%.

  • avatar

    I buy absolutely into turnaround in late 09, possibly earlier (unless we’ll have a Great Depression…) With cars being more or less discretionary purchases, people can hold off. Currently: Big holdoff. Result: Pent-up demand. Big time in USA. Come one week-end in the not to distant future, and suddenly, showrooms will be full, as if it’s a conspiracy.

    I’m old enough to have lived and worked in the industry through many recessions, from the big oil crisis of 73 onwards. Each time people prognosticated the world coming to an end, it didn’t happen. They’ll be back. In droves. Gas prices already palatable. (In Europe, people have the stomach for twice the price due to taxes.) Give people credit and hope and whoppee, they’ll be back.

  • avatar
    50merc

    “Toyota is also getting hit by a rising yen.”

    They better watch it. Rising yens got those rich German ladies in trouble.

  • avatar
    heaven_on_mars

    While Toyota maybe going down, the competition is going down quicker, thus giving them a larger market share. When ever the turn around in the economy happens, odds are Toyota and Honda will have record shares of the North American new car market. No one has a death watch on Toyota or Honda, unlike Ford, GM, and Chrysler.

  • avatar
    SkiD666

    “At least they still have profits … ”

    They have profits because they made good money in the first 6 months of their fiscal year. They are basically saying they won’t have a profit in the 2nd half. Next year they might even have to show a loss for part of the year.

  • avatar
    Lumbergh21

    How much of a bonus do you think Maximum Bob and Rapid Rick would get if GM reported a $6B profit? Given their bonuses when GM loses $6B, or more, I imagine that their bonuses would total at least $6B if GM reported a profit of $6B. You’ve got to pay top dollar to retain top executives after all.

  • avatar
    quasimondo

    Turnaround in late 09? 12 months and then everything is okey-dokey again? Why? What exactly is there in the environment that gives a shred of evidence to this prediction?

    They’re Toyota. What other evidence do you need?

  • avatar
    Geotpf

    B-Rad :
    November 6th, 2008 at 1:35 pm

    This makes me wonder what kind of cash Toyota has laying around just in case they can’t stay in the black sometime in the next couple years, whether overall or just in EUR or NA?

    Lots. Their overall profits each of the past three or four years were about ten billion US dollars. That’s after all expenses, such as R&D (although not divideds). They have 2,590,245,000,000 yen in cash or short term investments, according to their Financial Statement ending in June. That’s $26.5 billion dollars-just sitting around in Scrooge McDuck’s money pit. Their total Current Assets (including receivables and inventory) are 12,939,545,000,000 yen, and their total assets (including things like plants and equipment) are 34,185,561,000,000 yen. If you subtract all their liabilities, they have 12,253,038,000,000 yen in total equity ($125.2 billion dollars).

    GM and Ford and (probably) Chrysler have negative total equity. (-$57 billion for GM, -$1.7 billion for Ford, and -$??? billion for privately held Chrysler)

  • avatar
    oldyak

    Great news!!!!
    Let Toyota suffer for a while…and feel what its like!!!

  • avatar
    volvo

    This makes me wonder what kind of cash Toyota has laying around just in case they can’t stay in the black sometime in the next couple years, whether overall or just in EUR or NA?

    Lots. Their overall profits each of the past three or four years were about ten billion US dollars. That’s after all expenses, such as R&D (although not divideds). They have 2,590,245,000,000 yen in cash or short term investments, according to their Financial Statement ending in June. That’s $26.5 billion dollars-just sitting around in Scrooge McDuck’s money pit.

    Just imagine how large their profits would be if they had not made the mistake of hiring such low cost management and non union labor. If they had unionized their plants and paid the amount necessary to attract the kind of top management GM has on board Toyota’s profits would probably be millions of dollars a year!

  • avatar
    oldyak

    still great news!
    the unions haven’t killed to auto industry,Buyers did that all by themselves…
    While I would like to thank smart car buyers for making the ‘right’ choice,I still want our home companies to survive,and not by selling substandard products,they haven’t done that for a few years now!
    We need to give them a chance…

  • avatar
    Landcrusher

    Quality perception could easily be a lagging indicator. It’s possible that Toyota is no longer number one in quality, but we won’t know for a few years.

    I wouldn’t trade my ’97 for many of the newer ones.

  • avatar
    Bridge2far

    Toyota definately staggering. Quality, sales, and profits spiraling downward. Too bad.

  • avatar

    @Landcrusher: Of course it’s a trailing indictator.

    - For the CSI, JDP asks owners of cars up to 2 years old (maybe 3, I need to look it up)
    - Then it takes them 6 months to crunch the data
    - People sometimes forget and lie.We’ve found people answering the questionnaire for cars 4 years and older, for cars they had sold already, or for cars they never owned.
    - Surveys are a matter of who you ask and when. I could help any car company that pays me to improve their CSI – without touching plant or car.
    - But JDP already is in that consulting business. Their money comes from selling studies to car companies, and then from advising them to better their score.
    - JDP got a foothold in the German market only after Toyota and Ford helped them. The Europeans had done everything to shut JDP out, and to protect their ECS study on which everybody can look good.
    - Now while there may be some occasional hanging chad, there is no doubt Toyota deserved that title in Germany. Maybe not by that high a margin. But their cars are good. Euro cars are overengineered, too many computers with too many bugs. People want a car. Not a computer network.
    - Toyotas sold in Germany are Made in Japan. And go through rigorous pre delivery checks.
    - The best part: Toyota’s stellar scores drive Europen, especially German auto makers bonkers! A national outrage! Which did much to improve German quality. It surely needed the inspiration.

  • avatar
    Geotpf

    Toyota’s plants in Japan, Mexico, Long Beach, California, and Fremont, California are unionized. The ones in Japan and Mexico by the local auto unions in those countries, the Long Beach plant is unionized by the Teamsters, and the NUMMI plant in Fremont is a UAW plant (technically, it’s a joint venture with GM, although 75% or so of the product made in that plant has a Toyota badge on it, and the other 25% is a rebadged Toyota Matrix, with a Toyota sourced engine, transmission, and overall platform). They can deal with unions if needed, although, like every other company on the planet, prefer to not do so if they can avoid it.

  • avatar
    Geotpf

    Oh, and Toyota’s quality is not going down. They had a hiccup last year when three of their products got “worse than average” ratings from Consumer Reports. But, this year, all of their products got at least an average rating with most of them getting better than average ones. Toyota, unlike some companies, learns from their mistakes, mans up, and fixes the problem.

    Their sales are down because everybody’s sales are down. Their sales are down significantly less than Detroit’s, however.

  • avatar
    ronin

    There will be no ‘return to normal’ in the end of 09. In fact, what we are seeing now is exactly the return to the mean. The last 8 years have been the anomaly, abetted by free and easy credit and the social acceptance of lots of personal debt used for consumption.

    Kiss those days goodbye for a generation or two. No one is seeing wage increases, but they are seeing plenty of business loss and hence job loss. It is getting harder and more expensive to get car loans.

    The myth of ‘pent up demand’ if it even exists, is met head on by the reality of pent up demand for food and shelter and saving for retirement and education. Transportation is easily met by buying 5 year old cars forever.

    The haze is clearing from people’s eyes, and they’re asking themselves what were they thinking spending a year’s worth of disposable income on a vehicle now worth less than what they owe. Not running back into the showroom too soon after that experience.

    That new Toyota Camry wagon, jacked up and 4WD looks very cool, and is a nod to the old Eagle. On the other hand, Toyota thinks they can sell it for well into the 30k’s in this environment? The automakers still think that somehow the world (or the US taxpayer) owes them the margins they used to enjoy on SUVs and pickups.

    And that’s the reason they aren’t moving. Cars cost too much, period. The message is not getting through to those guys.

  • avatar

    @ronin: The pent-up demand after a crisis is no myth. I’ve seen it crisis after crisis in the more than 30 years I have been in that funny business. It is a statistical fact. I also have seen lots and lots of doomsday prophets during every crisis who said “This is it. This is the big one. Head for the hills.”

    So far, they were all wrong. Head for the hills they did. To turn them into developments. Who knows, maybe doomsdayers will be right this time. I hope not. It doesn’t look like it will be the big one. This crisis will go, as the early 80’s stagflation did, as the savings and loan did, as 89 did. Tokyo crashed in 1990, some say, they never really recovered. I can tell you, they are doing just fine. I’m there every other month, my wife is Japanese. And I call an economy where a 15 minute taxi ride sets you back $70 quite healthy.

    In case you really want to see what’s going on: The median age of American car buyers is in the mid 30’s. Head on over to http://www.nationmaster.com/country/us-united-states/Age-_distribution and have a look at the 2010 chart. You see a thinning in that bracket. This is what we really should see. Buyers that aren’t there can’t buy. It’s that simple. But soon, there will be another wave of eager buyers, just give them a little time to grow up.

    In 1998 – sales were way down in Europe, and generations of bicyclists were prognosticated – I helped (ahem) write a book titled “A New Era of Customers, Quality, and Service.” In that tome, we prognosticated a huge increase of car sales, and btw a stock market boom, based on demographic studies alone. People thought we were nuts. We further prognosticated that after 2010, that trend would wane. People didn’t even get to that part, engrossed in doomsday depressive behavior, they didn’t want good news. Mind you, this was for Europe. At the time the book was written, the median age of the German VW buyer was at 46 years. We see growth in the Western European car market for a few more years, and then it will be down, down, down. Not because of the economy. Because of a lack of people. In the USA, people will be back to buy. Mark my words.

    If it’s the big one: Fine by me. I believed in what we wrote. I bought a Park Avenue duplex for nothing in 1991 and sold it in 2002. I bought a house in the Hamptons for next to nada in 1997 and sold it, barely ditching the bullet, in early 2007. I saved enough. I live cheaply in China. (Stock tip: Slowly start looking at Chinese index funds.)

    You are right, we need cheaper cars.

  • avatar
    Landcrusher

    Geotpf,
    The surveys are relative which opens up two points. One, years ago Toyota took apart a neon and decided that they were overbuilding many of their components and that it wasn’t cost effective. Personally, I like overbuilt, and am willing to pay a premium for it. Right now, I am concerned that the Toyota premium is overpriced. This is related to the second point which is that I don’t believe that Toyota’s lead in quality is nearly as large as it used to be.
    Fair disclosure, I have no “facts” to base this on, but it’s my opinion.

  • avatar
    Landcrusher

    Bertel,
    If it’s the big one, money will be worthless so other than stocking up on beans and ammo, the rational player assumes the light at the end of the tunnel is not a train.

  • avatar

    @Landcrusher: As much as I love you, one item cannot remain uncorrected. In a true depression, money in the bank, under the mattress, a cold cash kitty will be is everything but worthless. A depression is when prices of stuff down and cash is king. Money becomes worthless when the government starts printing monopoly money to fund economic stimuli. THEN, the smart buy real estate.

  • avatar
    Landcrusher

    Bertel,

    Sorry for the misunderstanding, I wasn’t talking about a depression when I said “the big one”. When I start talking about beans and ammo, I am talking about a collapse where paper money and rule of law have gone out the window. I use that to point out that there ARE best choices to make economically no matter what.

    Flight instructors use the expression, “Keep flying the plane,” to impress upon pilots the need to never give up. You keep making rational decisions and doing your best. Failure to do so can turn an 80% chance for survival into certain death. Fear is the thing you can’t give in to.

    It’s the same thing with money. You keep making the best money decisions as long as you can. If you get a feeling of futility, you “invest” in a supply of beans and bullets and then get back to maximizing your wealth. If we give up, the politicians will be happy to take over our wealth. Fear is the thing you can’t give in to.


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Authors

  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Matthias Gasnier, Australia
  • Tycho de Feyter, China
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Faisal Ali Khan, India