The Unthinkable Happens: Toyota Will Post Loss
Although genetically adverse to saying the L-word, the Japanese will have to famiriarize themselves with it: “Plunging sales worldwide and the yen’s sharp appreciation will likely push Toyota Motor Corp. into its first-ever operating loss” in their 2008 fiscal year, writes an aghast Nikkei (sub) today. In earthquake-prone Japan, this resembles a 9 on the financial Richter scale. Once, Toyota came close: In ancient 1949, when Japan was a chaotic mess after World War II and was ruled by a benevolent dictator called McArthur, Toyota had a pre-tax loss. But they never posted an operating loss since Toyota began releasing earnings figures with fiscal 1940. This announcement will leave Japan shell-shocked. They have a different attitude towards losing money than in What-me-worry Land.
In November, Toyota’s new-car sales dropped 30 percent in the three major markets of Japan, the U.S. and Europe. Nikkei: “The downturn is continuing in December, with sales in North America, in particular, worsening as approval standards for auto loans are tightened. The severe global sales slump is estimated to depress the firm’s profits by more than 200 billion yen in the current fiscal year.”
What is also depressing Toyota’s books is the yen which has risen sharply against major currencies. The exchange rate alone will cost Toyota roughly $2b on their balance sheet.
Then, there are the toxic loans: “When loss reserves for its auto-financing business are added to the mix, the nearly 600 billion yen in profits that Toyota earned in the April-September half are now unlikely to be enough to keep the automaker in the black for the full year,” the Nikkei says.
They probably would've broke even if they abandoned their involvement in F1.
Misery loves company, I suppose.
J Horner, What you say is true, only it's not. Yes, modern corporations can't manage whipsaws in the economy because they have used finance techniques and business strategies to maximize profits which they are almost forced to use because everyone else does. However, very conservatively run businesses could easily deal with these issues. The only problem is that they have mostly been bought out or put out of business by those who more highly leveraged their businesses. The free lunch of all this creative financing is now being paid for. When all the governments stop fixing the game in favor of large employers then these problems will be reduced.
Thanks for this non-news story. The key word in the article is Toyota will likely post a loss. As respected as Nikkei is, they are simply speculating. There is NO guarantee that Toyota will definitely post a loss. Toyota's latest projections still call for profit in this quarter and the next. I'll believe it when I see it. If Toyota posts a loss, and TTAC posts a link to Toyota's website showing that, then we can talk.