Toyota's '08 Losses 3X Worse Than Thought: $4.95b
Toyota will end their fiscal year ending in March badly bruised. Financial Times reports that ToMoCo’s losses will be three times larger than previously forecast. The worst industry slump in decades has put a painful crimp in an amazing run. Last year, Toyota earned a record operating profit of $30b. In the same year, they became officially the world’s largest automaker, a title many had said should have been given to Toyota a year before. In November 2008, Toyota still projected a profit of $6.6b. Then, carmageddon caught up with them.
In December, Toyota gave the entire global auto industry a sobering wake-up call: for the first time in history, they would close the year with an operating loss of $1.7b. That’s less than the monthly cash burn of GM. But a loss is a loss, a major dishonor in Japan. Sweeping reforms were instated. Top management was changed. Akio Toyoda, the grandson of Toyota’s founder, assumed the company’s presidency.
Toyota now projects an operating loss of $5b. Toyota warned that for the first time it would fall into a loss at the net level as well. A net deficit of $3.9b is expected.
While a strong yen has hurt the books at Toyota’s HQ, the revision is almost entirely caused by declining sales. To maker matters worse, Toyota today lost its AAA rating from Moody’s, which cut its Aaa senior unsecured long-term rating on the company to Aa1 and warned that further downgrades could follow.
The canary in the coal mine is looking plenty peaked.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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The Financial Times story is based on Toyota's fiscal year 2009 third quarter (through December 31, 2008) financial numbers, which were released today. As DimaK says, the numbers show a company that is still in great financial shape. But as gm-uawtool points out, there are some real trouble signs too. Toyota had an operating loss of over $3.5 billion in that third quarter. Since it still has an operating gain of over $2.2 billion for the nine months ending December 31, Toyota expects to lose $6.7 billion in the current quarter (January 1 to March 31). Not a pretty picture. But I don't see in the figures the borrowing that gm-uawtool does. I see long-term borrowing actually decreasing, with short-term borrowing increasing. They essentially net out. Toyota will lose money. But their balance sheet will handle it pretty easily. Carmaking is definitely in crisis. But Toyota seems to be weathering the storm fairly well. At least investors seem to think so. As I type this, Toyota's stock is up 0.5%, to over $69. That gives it a market cap of over $108 billion. Investors think differently about GM. GM's stock is down slightly, to $2.82. That gives it a market cap of under $1.75 billion.
Here's Toyota's financial statement from the latest quarter: http://www.toyota.com/about/our_business/investor_relations/financial_data/2009/20090206FinancialSummary.pdf It goes into more detail than the link posted earlier by dymak. Page 14 details the borrowing acitivity for the first nine months of the fiscal year that I alluded to. No matter which way you slice it, those are alarming numbers and an extremely abrupt turnaround for any business. Shows how much gravy they got from the weak yen as well.
gm-uawtool, did you notice the payment of long-term debt that more than balances out the proceeds from new long-term debt? Toyota has, and will be, drawing down on its liquid assets as its losses mount. This financial report shows Toyota sold some securities to get cash, and increased its short-term borrowings. That definitely does weaken its balance sheet. But I don't see the alarming numbers in this financial report that you do. It seems like you are trying to paint Toyota as being as troubled as GM. That's not a picture I see in these financials. Investors haven't seen it either.
There's one big thing that people are missing though; Based on 2007 results, Toyota had a swing of almost $35 billion dollars. To go from $30 billion in profit one year, to $5 billion in losses the next is HUGE. Toyota is still not as sick as the domestics financially, but they aren't exactly healthy right now either. (they'll recover, but it isn't going to be pretty in the short term)