When GM was in its final throes (about 2000 onwards) it was quite easy to see that GM would go under. Even though they were posting records profits, anyone but the shills knew that these profits came from the SUV boom and not from any long term sustainable plan. That’s fair to say, right? So now let’s move to Toyota. The cry I hear, these days, is “Toyota is the new GM! Toyota is the new GM!” (Why people have to say things twice, I’ve no idea. I’m not deaf, just stupid.) And there is certainly some evidence to suggest that. Piling on the incentives, suspect quality, etc. But then something comes along which, seemingly, blows that theory out of the water.
The BBC reports that Toyota is announcing massive profits for the second quarter (about the height of the witch-hunt). Toyota earned for the period of July to September (Toyota’s fiscal year goes from the beginning of April to the end of March) 98.7b Yen. That’s about $1.222b. Toyota was so bullish about this profit that they raised their profits forecast (again) to 380b Yen, which is about $4.7b.Toyota’s executive vice president, Mr Satoshi Ozawa, did give the customary warnings about the strong yen and also said of a “very tough business environment, characterized by the radically and seriously appreciated yen in recent months, the risk of slowdown in demand recovery in the United States and Europe and falling demand following the end of the eco-car subsidies in Japan.” The only area he didn’t mention was India and China, the two markets which Toyota were weak in.
When I read this story, I just couldn’t believe it. Where did those profits come from? So I went to Toyota’s official website to dig a little deeper. On it, it gives a breakdown of where the profits came from.
“In Japan, operating loss improved by 205.7 billion yen, to a loss of 52.0 billion yen.”
Ok, so the profits didn’t come from Japan.
“In North America, operating income increased by 119.0 billion yen to 145.9 billion yen, including 9.8 billion yen of valuation losses on interest rate swaps. Operating income, excluding the impact of valuation losses from interest rate swaps, increased by 143.7 billion yen to 155.7 billion yen. The increase was due to improved earnings from the financial services segment. “
OK, some of the profits came from North America.
“In Europe, operating loss improved by 9.7 billion yen, to a loss of 8.9 billion yen.
Operating income in Asia increased by 98.8 billion yen, to 164.2 billion yen.
In Central and South America, Oceania and Africa, operating income increased by 32.3 billion yen to 72.9 billion yen.. “
So, losses in Europe, unsurprisingly, and increased income from Asia and the rest of world is good news. But where did the majority of their profits come from? Then the answer comes in the next paragraph.
“In the financial services segment, operating income increased by 59.3 billion yen, to 183.7 billion yen compared to the same period last fiscal year, including 0.4 billion yen of valuation losses from interest rate swaps. Excluding these valuation losses, operating income increased by 76.6 billion yen to 184.1 billion yen. This was thanks to our better-than-expected used car pricing that resulted in a decrease in our loan-loss and residual-loss related expenses, partially through reversal of the relevant provisions as reported for the first quarter as well as an increase in our lending balance following reinforcement of our financing programs.“
Toyota’s financial services are going great guns! Just like another company, before its bankruptcy… Now, as long as you don’t write mortgages for houses, financial services always have been like printing money for a car company.