Killer Yen And Thai Floods Cost Toyota $4 Billion
Toyota presented today its revised outlook for the fiscal year 2012 (ending March 31, 2012). Only people who inhabitate spaces under rocks gasped when Toyota’s Executive Vice President Satoshi Ozawa announced that Toyota is looking at making only half the money it projected back in August. After a gloomy forecast in June, recovery from the tsunami had progressed faster than thought. Then, the waters in Thailand and the killer yen kept rising.
The floods in Thailand will cost Toyota 120 billion yen ($1.54 billion). The killer yen will destroy 190 billion of its own currency in the books of Toyota , or a whopping $2.33 billion. All in terms of operating income. Toyota expects a net profit of 180 billion yen ($2.3 billion), down 54 percent from the 390 billion yen forecasted in August.
Osawa said that the Thai floods resulted in 230,000 cars not made. Targets for fiscal 2012 were downrevised to 7.38 million units for 7.6 million units estimated in August.
Careful: Don’t believe it when wire services write “Toyota expects to sell 7.38 million vehicles worldwide this year instead of 7.6 million it predicted four months ago.” Toyota expects the 7.38 million this FISCAL year, not this CALENDAR year. A projection for the calendar year was not immediately available (we’ll try to get one,) but the back of my envelope says between 7.6 and 7.7 million across all TMC companies (Toyota, Daihatsu, Hino.)
Even the last inhabitant of spaces beneath rocks finally realizes what we had cautiously intimated a year ago, and what we had said loud for more than half a year: By the end of the year, that’s in three weeks, the ranking will go GM Volkswagen Toyota #3.
Ironically, Thailand was the place where Japanese carmakers fled to escape the rising yen.
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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Profits made by lying to the Public/Govt about stuck accelerators - $1.2B Money saved by lobbying against safety improvements - $0.4B Money saved by hiding safety defects in the US - $1B Losses due to Japan Quake/Tsunami - $1.3 B Losses due to Thai flooding - $1.3B Net - $0.00 I think we are even now.
I would speculate there are two major impacts with an annualized profit project dropping to $2.6 Billion US (at today's exchange rate, give or take a Yen, assuming my math was right) 1) Huge pressure on the Japanese government to weaken the Yen - however there are macro economic factors that make that difficult 2) If one can't happen, as we're already seeing, Japan will see it's own manufacturing arms leave the country. Auto will be first, but others may follow. DEY TERK ERRRR JOBS!!! This raises further questions on long term quality and reliability. The perception in America post Toyota recall debacle is not Japanese = good, it is made in Japan = good. This was because for almost all vehicles recalled, the versions impacted where the made in US ones. That had nothing to do with Bubba and Floyd, it had more to do with supply chain and suppliers - but try explaining that to someone. 3) Longer term impact on R&D and contenting. The Koreans and US companies are putting huge pressure on Japan to raise the content bar, right at the time they were dropping it. A lack of free capital and tightening CAFE standards makes it hard to tweak engines and transmissions while coming up with the next interior ooooo ahhhhh that customers appear to want in the North American B, C, and D segments. I see this as the biggest issue.