Toyota: Recall To Cost $2b This Quarter, Dent Improved Financial Outlook
Agressive cost-cutting and improved sales yielded $1.68b in net profit for Toyota in the three months ending December 31, reports a press release in the WSJ. Sales revenue climbed 10 percent to $58.2b in the October-December quarter, boosting operating profit to about $2b. This quarter alone though, Toyota reckons the recall could cost the company $2b in repair costs and lost sales. For the fiscal year, ending on March 31, Toyota says the final impact should be limited to about $900m in losses on an operating basis, and has revised its fiscal year net profit projection to about $900m (compared to a $2.2b loss projected in November).
The fact that the recall hasn’t wiped out Toyota’s improved financial projections can be credited to more than $6b in fixed-cost-cutting and over $5b in other cost cuts. “Pursuing quality and cost-reduction isn’t contradictory,” said Toyota Senior Managing Director Takahiko Ijichi. “We will continue to aim to reduce costs.” And he’d better be right, because these cost-cuts probably won’t be optional. Toyota is projecting only 100k lost sales from the recalls, and the numbers almost certainly don’t include the latest Prius brake issues. As with the recall itself, Toyota is moving aggressively, but is a long way from being out of the woods.
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At this point GM's cash reserves match Toyota's and thier balance sheet is probably just as clean (government funded BK can do amazing things) In the finance world the primary concern is that Toyota's massive cost cuts last year are not sustainable (cutting back R&D and re-tooling, etc. vs. closing factories and layoffs) and that the denial that Toyota has shown during the last few months, seems to have permiated the rest of the corporation. Yes they can cut costs to make thier numbers, but they aren't the correct long term cuts necessary and the impact will show up in the next generation of vehicles, just when they cannot afford for that to happen (sounds alot like GM doesn't it?). With thier massive reserves, rather than playing to the market (sounds alot like GM?), would it not be better to bite the bullet and use those reserves and take the short term losses to get the company back on course.
The stock markets are taking a royal hammering today and looking at the ticker on the side of the screen, which car maker has taken the least hit? Toyota! Does anyone have ANY idea how the markets work?!
Yeah I have a great idea and I can tell you that looking at a particular company through loving rose colored glasses on a day to day basis isn't it.
For the recalls Toyota has taken a hit as well as sales drops and earnings. But Toyota did announce less of a loss than expected, which is some good news. If people think the stock is low, they will buy it in hopes of it going up. I would expect it to be down further before it makes a rebound. The car market is not up by a long shot.