Toyota Plays Poker With A Weak Hand

I used to play poker a lot. So I’m perfectly aware of the old adage “ Strong is weak and weak is strong“. If someone is acting weak, chances are, they’ve got a good hand and are trying to lull you into a false sense of security. Likewise, if someone is acting bold, then there’s a good chance they’ve got “rags” and are trying to scare you off to collect the pot for themselves. Like when Cerberus purchased Chrysler. It was an open secret in the industry that Chrysler was ready for the knacker’s yard…again. But Cerberus still pushed ahead with the purchase. Eventually, Chrysler failed and Cerberus lost money. Which made everyone wonder “What were you thinking?” I have a suspicion people will start asking the same question about Toyota soon.

Reuters reports that Toyota Europe’s head, Didier Leroy, is bullish about Toyota in one of Toyota’s weakest markets. He believes that they will achieve European sales of 800,000 this year AND achieve higher sales next year, even if the market dips. “We can expect now that we will be able to recover 100 percent of what we lost versus our initial forecast,” said Mr Leroy, “We strongly believe that we will be able to achieve 800,000.” The article posits that expanding markets like Turkey and Russia will be key to achieving Mr Leroy’s goal.

Mr Leroy also set a goal of getting Toyota Europe to sell 1m units a year within the next 5 years. But he said that he wouldn’t sacrifice profitability in the name of more sales. This brings us to the strong yen. While he acknowledged that the strong yen was creating “terrible conditions”, they were looking to bring more localization to buffer themselves from this obstacle.

I, personally, can’t see Toyota achieving this objective any time soon. European car makers are having a tough time themselves in their own markets. A wounded animal, and all that. What makes a Japanese company that had never been too strong in Europe think they can achieve record sales in an economy that doesn’t know whether they’ll be in recession next year?

[ED: One possible – but weak – explanation is that Toyota’s “Europe” is much larger than “Europe” in the common sense. That’s why TME’s sales never jibe with the ACEA numbers. TME’s Europe contains Russia all the way to the Pacific, and sundry other countries that would never appear on a European map.]