By on May 10, 2017

toyota camry

Even as it develops efficient new platforms and streamlines its operation where it can, Toyota finds itself against the ropes as a falling yen and rising costs sends profits tumbling. Its end-of-fiscal-year financial statements, released today, are enough to send bean counters to the medicine cabinet in search of antacid, while the company’s president warns of more trouble ahead.

To Akio Toyoda, the increasingly gloomy picture has all the hallmarks of a failing sports team.

While global Toyota sales increased slightly in the fiscal year ending March 31, it’s what’s happening outside the dealership that concerns Toyoda. The company’s operating profit fell 30 percent to $25.62 billion and net profit dropped 21 percent to $20.73 billion. Overall revenue also took a haircut, falling 2.9 percent.

In the last fiscal quarter, operating profit fell 20 percent and net income 6.6 percent (to $3.58 billion). These numbers include the automaker’s Daihatsu and Hino small car and truck subsidiaries.

According to Automotive News, Toyoda doesn’t expect the situation to improve in the current fiscal year, either. He has told investors to brace for further losses and another bad fiscal statement a year from now.

“I feel a strong sense of crisis about whether or not we are actually executing car-making from the perspective of the customer in all Toyota workplaces, from development, production, procurement and sales, all the way to administrative divisions,” Toyoda said. “In the case of sports, booking two consecutive years of losses would mean you are failing. I hate to be beaten.”

More streamlining is required as labor and R&D costs, as well as incentives to move vehicles in a stagnant market, have all eaten into the company’s profit margins. Another factor is beyond Toyoda’s control: currency. The automaker saw $8.45 billion lopped off its operating profit last year due to exchange rate fluctuations.

While Toyoda plans to spend less money going forward, his company’s expenditures haven’t proved fruitless. Much work went into the development of the TNGA platform to underpin many of its vehicles, including the next-generation Camry, and plenty of cash went into retooling factories to handle the new builds.

Still, the automaker feels the need to develop and build product in a more efficient way.

“When it comes to making ever-better cars in a smart way, it is becoming apparent that there is still room for improvement,” Toyoda said.

[Image: Toyoda Motor Corporation]

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42 Comments on “Tumbling Profits Force Toyota CEO into Crisis Mode...”


  • avatar
    SCE to AUX

    Reductions in profit are not “losses”.

    One suggestion: Abandon hydrogen fuel cell development.

    • 0 avatar
      56BelAire

      Fire the idiots who designed the butt ugly front ends of your Toyota and Lexus cars……oh, and fire the guys who approved the design as well.

    • 0 avatar
      Guitar man

      $20 billion in profit and about $100 billion in cash reserves. Meanwhile their largest competitor has chucked in the towel in most of the world outside USA.

      Yep they’re crying all the way to the bank.

  • avatar

    Seems like an easy enough fix. Make cars folks want to drive, how about a hot hatch or a good hatch for that matter? I personally moved away from Toyota after they botched the redesigns of the Sequoia and the Avalon. For fun I bought a new VW GTI. For other vehicles I moved on to Honda and Mazda, I used to really like Toyota products.

    • 0 avatar
      brn

      You mean make cars that enthusiast say they want to drive, but don’t actually buy?

    • 0 avatar
      30-mile fetch

      Honda and Mazda make a better Sequoia and Avalon?

      • 0 avatar
        APaGttH

        GM may not make a better Sequoia, but they sell a Hell of a lot more of them.

      • 0 avatar

        The Honda Pilot is not an over-sized ugly stick beaten jellybean and for the kids Mazda’s were less expensive and better equipped than Toyota. I gave up trying to buy a decent full sized sedan and went with the GTI.

        • 0 avatar
          30-mile fetch

          The Highlander is the competitor to the Pilot. No wonder you didn’t like the Sequoia, you didn’t know what segment you were in.

          Good choice on the GTI, but it is odd to be cross shopping it with an Avalon.

          • 0 avatar
            highdesertcat

            30-mile fetch, I think that CecilSaxon is just blowing smoke, comparing apples to pears and oranges to watermelons.

            We sure like our 2016 Sequoia. It’s better than either of our two Suburbans ever were, and rides smoother, handles better and is more quiet on the road.

            Our 2008 Highlander was such a fine CUV that Honda had to redesign and enlarge the Pilot to what it is today, in order to compete.

            But both are very refined, even at the lower trim levels.

  • avatar
    Corollaman

    They were super late to the small-ute party and then they come up with the ugliest thing their so-called designers could come up with.

  • avatar
    Master Baiter

    “…net profit dropped 21 percent to $20.73 billion…”

    Doomed.
    .
    .

  • avatar
    Lou_BC

    “More streamlining is required as labor and R&D costs”

    I just read that one robot replaces 6 workers.

    “Dōmo arigatō, Mr. Roboto”

  • avatar
    ajla

    DeUglify the Lexus lineup and bring back some of the tactile quality to the Toyota brand.

  • avatar

    GM and Ford can only dream about this kind of “losses”.

    • 0 avatar
      highdesertcat

      “GM and Ford can only dream about this kind of “losses”.”

      That’s for sure!

      OTOH, Ford really is the ONLY American brand left standing, and for those who simply have to buy American, Ford is the goto brand, even though Toyota has the higher American content.

      I’m a Toyota fan these days and what attracts buyers to Toyota is the dated reputation for building high quality, durable, dependable vehicles that retain their value long after all other brands have been sent to the crusher.

      Then again, the Toyota products of today use the same suppliers as all the other car makers in America, and thus suffer from the same quality maladies.

      • 0 avatar
        brn

        highdesertcat,

        Overall Toyota does not have higher American content.
        http://time.com/4677817/american-cars-brands-manufacturing/

        In addition, the foreign content in “American” cars tends to be from Canada or Mexico, our next door neighbors.

        It’s all a matter of how you look at the numbers.

        • 0 avatar
          highdesertcat

          brn, thanks for bringing me up to date.

          Last I saw in an article I read that Toyota had the highest American content, thus being the MOST American cars, more American than the domestic brands.

          Things change.

          • 0 avatar
            gtemnykh

            “In addition, the foreign content in “American” cars tends to be from Canada or Mexico, our next door neighbors.”
            That’s the problem. “North American content” is a cop-out.

            Camry is the single most American car in terms of actual DOMESTIC (ie US made) content, and of course it is assembled in the US. Fusion is hencho en Mexico with less than 50% US parts last I checked. GM’s Lambdas are up there too with last I checked 80% or so domestic content and assembled in Michigan. Out of the trucks, F150 and Tundra lead the pack with US-exclusive assembly and 70% or so US content. Ram and GM are in the dumps with both a large portion of Mexican based vehicle assembly and an astounding percentage of Chinese/Malaysian/Mexican components. I’ll take a largely American Toyota with a few Japanese components any day.

          • 0 avatar
            highdesertcat

            gtemnykh, that was my understanding too.

    • 0 avatar
      RobertRyan

      Even TTAC’s ” Evil Empire” is on track for record profits. Ford/ GM are showing signs of becoming basket cases

      • 0 avatar
        highdesertcat

        GM, I can understand. It was brought back from the dead.

        Ford, IMO, just put too much capital in future-oriented ventures.

      • 0 avatar
        dash riprock

        Ford/ GM are showing signs of becoming basket cases

        Ford is having some financial struggles this year compared to the recent few, but basket case? What “facts” are you making this statement on?

        Apr 28, 2017 – GM Reports Strong Net Income, Up 33.5 Percent to $2.6 Billion. General Motors Co. (NYSE: GM) today announced record first-quarter earnings and revenue driven by robust retail sales of full-size trucks and crossovers in the United State

  • avatar
    Lightspeed

    I am imagining a scene where Akio Toyoda rapells from helicopter onto a glacier, treks against a blizzard over a mountain pass, fights off a grizzly bear. He arrives at a remote cabin on a mountain top. Opens the door, enters and kneels in a deep bow before an old man who is painting on rice paper. the camera peers over his shoulder to reveal his brushstroke create a perfect profile of the 2000GT in one fluid motion. Akio looks up and says in a shaky voice, “Master, we need you.”

  • avatar
    carguy67

    I’m confused. The knock on the Japanese has been–basically, forever–that they manipulate the yen to keep its value low compared to say, oh, the dollar. Theoretically, Japanese cars would be priced 5%, 10%, 15%, maybe even 20% more if the yen was more realistically valued against the dollar (same ‘techniques’ the Chinese use to keep the yuan low to keep their cheap crap cheap). I guess the takeaway is that currency manipulation can backfire, if you have to buy raw materials and components in international markets with an undervalued currency?

    OTOH, bought some parts from England after the Brexit vote and saved a boatload.

    • 0 avatar
      highdesertcat

      “…that they manipulate the yen to keep its value low… ”

      That probably still applies to imports from Japan, but I don’t think it applies to Japanese cars made in the US and North America.

      It’s an interesting point. Maybe one of the B&B can tell us more.

    • 0 avatar
      Lou_BC

      carguy67 – My understanding of currency manipulation is this: China did that in the past by purchasing USA debt and treasury notes. If you buy more than you need to offset a trade imbalance, that devalues your currency and gives your product an advantage. That worsens a trade imbalance.

      Japan’s economy has stagnated, therefore I doubt that they could even afford to currency manipulate.

      Focusing just on the numbers shown on a balance sheet does not tell the whole picture.

      That is my understanding of the issue. It would be nice to hear from someone with expertise in this matter.

    • 0 avatar
      ccode81

      Most of the money Toyota makes in US is by selling US built cars.
      As long as car is built with cost of $xxx and sold at $yyy, when yyy is larger than xxx, they are not failing red, healthy business, easier to control.
      However, Toyota HQ in Japan takes some dividend from profit of subsidiary Toyota US. say this is $10 bln, when $1=JPY120, dividend in JPY is 1.2 trillion. when JPY strength to $1=JPY100, converted dividend is 1.0 trillion only. it shrinks, but not a factor to fail red.

      This is very different from how they potentially lose by importing cars.
      let’s say a car built in Japan with cost of JPY 2 million , sold in US at $25k. @120 rate, sell price is JPY 3 million equivalent, profit of JPY 1 million, but @ 80 it is break even, any stronger JPY rate, it is simply money losing. (this is your mentioning Chinese model that they need to fix the FX rate artificially low).

      • 0 avatar
        deanst

        To oversimplify, Toyota may make, $5 billion annually from the u.s. They report their overall profit in Japanese yen, so perhaps last year that $5 billion was worth eleven zillion yen, and that same $5 billion this year may be worth 1 zillion yen. The profitability of the u.s. Operations are exactly the same, but when they consolidate globally it is reported as a huge decrease in profits. Not much they can do about this unless they want to hedge the currency – but this has costs and uncertainties as they do not know with certainty what their profits will be for the coming year.

        Alternatively, currency could hurt them if they have a mismatch in costs in one currency, revenues in another – I.e. Building in one country and selling another. Toyota has greatly minimized this as they build in the u.s. most of the vehicles they sell in the u.s. Maybe more progress could be made with some parts that are imported from other countries – I don’t know the details on that.

        As far as using a cheap currency to import from Japan to u.s., I doubt that it could be much cheaper to build in Japan versus building in Mexico, especially taking into consideration the extra shipping costs.

  • avatar
    zip89123

    Too many ugly Toyota & Lexus vehicles. Redesigning the grill would jump sales & profits 5% minimum.

  • avatar
    05lgt

    Well, it’s worth a try: STOP IT WITH THE UGLY, DAMN IT!

  • avatar
    mikey

    Ageing Baby Boomers are a huge vehicle buying demographic. At least they were. Millions of us are retired , or getting close. For most, the first few years were a party. Then reality sets in. Some wait too long. Others get their calculators out and do a little forward planning.

    So the couple that bought a new car every 3-5 years start to ask themselves ,”do we really need to do this? ” They may also figure , “why do we need 2 or 3 vehicles ?….If they find themselves absolutely needing to replace a vehicle, they look to “gently used”

    After the kids were done University , my wife and I drove only new cars. I kept a toy car in my garage. Those days are gone.

    My one and only vehicle is a paid for, Eco boost 2015 Mustang. The Mustang has 10,000 miles on the odo .I have it rust proofed every year. I own a set of Michelin X winter tires mounted on matching OEM wheels. I stash money for the inevitable after warranty repair bills .I have lots of free time to take it to the shop when needed. I plan to fix and maintain it, as needed. Even if I need to replace and engine, or transmission . Labour costs for such repairs are a lot less with RWD.

    With my wife’s mounting Health Care costs (NO… its not free in Canada) I just don’t see myself purchasing a new car for a long time, if ever. I have the resources to trade the Mustang in today . From my point of view, I do not think its prudent to dig in to said resources.

    My position is probably similar to many of us “aging boomers”….That translates to a whole lot of “former” new vehicle buyers….

    Just my thoughts

  • avatar
    redmondjp

    Mmmmm – maybe this is why I am seeing full-body shots of ‘Jan’ (Laurel Coppock) on the newest Toyota ads now. She’s no Jill Wagner, but still . . . no complaints.

    • 0 avatar
      dukeisduke

      Thanks for reminding me about Jill Wagner. Mmmmmm…

      But, bad news for all the single guys out there – she got married last month. Congrats to her and her new husband.

      https://www.facebook.com/jillwagnerofficial/

  • avatar
    Eyeflyistheeye

    I’ve always liked Akio Toyoda since he seems like he sincerely cares about his company and making good cars. As an old-school Toyota fan, I think Watanabe created more problems with his chase of the poisoned title of “world’s largest carmaker” than Toyota would like to let on.

    However, I don’t know if he’s going in the right direction. The C-HR gives nobody coming out of a competing compact car or SUV any reason to trade-in with its low horsepower and unappealing powertrain. Was it so hard for them to create a hot version with the Lexus 2.0t? And the ugly is just getting endemic. I still think Toyota and Honda don’t realize that just about everyone except for Sergio might not be at their levels of quality, but that their quality is more than good enough for most.

  • avatar
    Jeff S

    I doubt that the Japanese are undervaluing the yen. Since 1992 the Japanese have had no to low inflation and their economy has been stalled. The Japanese companies that have overseas manufacturing are better able to weather the economic conditions. Toyota is in a much more competitive market than it once was and it no longer has a monopoly on quality.

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