Toyota’s operating profits this year will exceed the entire market value of GM. This insight arrives via Ian Rowley in his Eye on Asia blog for Business Week. According to Rowley, with GM reporting a $39b loss and Toyota earning $11.2b, GM’s market capitalization (market cap) is now smaller than Toyota’s single-year profits. (To determine the market cap of a company, multiply its share price by the total number of outstanding shares and you get the financial size of the corporation.) Toyota is projected to have operating profits of $20.2b this financial year. At the end of the trading day yesterday, GM’s market cap was $19.21b. Rowley says yesterday’s announcement by GM makes the “huge earnings gulf” between the two companies obvious. While GM sells more cars annually in the US than Toyota does [for now], their “fortunes” are reversed when it comes to finances. The race for the title of world's largest automaker remains up for grabs, but any victory by GM at this point would have to be seen as Phyrric.
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When I saw the title of this post I thought “This is going to have 1000+ posts like that “In the Defence of: American automakers”! But it’s a valid post.
GM is in financial dire straits and all the sales in world won’t mean jack if they can’t make a decent profit on each car. They can only manipulate their figures for so long. The only way GM can save themselves if by getting a better operating margin. They’ve got the concessions from the UAW and we’re now starting to see the models which GM said would be next generation. If all of these don’t work, who will they blame, then?
I doubt Toyota will claim the number 1 auto maker title this year or next year, if they’ve got any sense. The reason for their drop in quality and reliability is because they are expanding too quickly and are losing the one reason people buy a Toyota to start with!
Now that would be a Phyrric victory……!
I strongly suspect that Toyota will be #1 soon, and will fix their “issues” with reliability – even if it means not taking the crown (no pun intended) until 2009 or 2010.
Katie, you’re right. There is no point in GM being #1 if they cannot survive (which entails – actually making some money).
What really truly got my attention a year or so agoo was that not so little, but virtually unheard of (in the US) Tata Motors and it’s attendant conglomerate (much as GM USED to be) was valued at a higher market cap value than GM. GM is no longer a conglomerate – it’s sold off everything including the family silver…
I essentially wrote off GM’s future survival about two years ago when they were losing $3800 per vehicle THEN decided it would be “wise” to give “employee pricing” to anyone with a pulse.
“How’d that work out for you, General Messup?”
The evidence of how that worked out for GM is in the headlines. $39 BILLION flushed. Gone, off the books, kaput, sianara.
Pyrrhus’ quote was the Final Jeopardy answer a few nights ago.
I’m wondering if the sinking dollar offers any hope for the domestic automakers.
Well let’s see, the price of gasoline has just about tripled in the past decade, the dollar has been losing value since King George started going on expensive foreign adventures, and GM’s best answer is to drop an electric motor into an Escalade?
Stick a fork in ’em.
Toyota WILL be number one, and GM will cease to exist if this lunacy continues. They should have got off the truck bandwagon more than 5 years ago, but like a heroin addict they just can’t resist yet another hit of smack. So long as carmakers don’t make actual CARS they are doomed to fail. GM has no “victory” to look forward to, other than survival… and only just that.
–chuck
GM just posted a third quarter loss of $39 billion. I guess that answers the question.
Who is first? It’s not much of a contest anymore: Toyota.
Toyota is far ahead of GM if you look at financial metrics: consolidated revenue, book value, stock value, profit, cash flow, credit rating, yearly investments in factories, yearly R&D spending and equity investments in affiliated suppliers.
With regards to number of vehicles sold the race seems to be close, looking at numbers given by GM and Toyota. But when you subtract vehicles sold by Wuling in China (only 30% owned by GM) and unprofitable dumping of cars into rental car fleets in the US, Toyota is in fact also ahead in this metric.
Even in China Toyota is now making more profit than GM.
In US retail sales (not counting fleet sales, such as to those pesky rental fleets) Toyota is only about 20% behind GM. I suspect in the near future Toyota can pass GM in this metric as well.
Why is it important who is first? It’s an important measure of economy of scale. As Toyota gets bigger, it will become harder for GM and everybody else to keep up.
For instance: in China Toyota now sells 150K Camry cars per year adding quite a bit of volume and profit to the global Camry platform.
(Have you ever wondered why the headlights of the new Camry look like Chinese eyes? Well, there’s your answer)
Yea… I didn’t see that before. I guess if they had “Japanese” eyes the Chinese wouldn’t buy them.
/sarcasm
GM will, IMHO, become a health insurance company.
Do some research on Kaiser Permanente health insurance company. You will find that it is what’s left of the old Kaiser Steel Co. of the early to mid 20th Century. It’s personnel benefits department morphed to become the company!
GM, given the hordes of retirees and other hangers-on who get a pension check from the General, is now just a HMO with a car plant out back (one that burns money almost as fast as the Pentagon).
The sooner the General acknowledges the blatantly obvious, the sooner there will be a (slim) chance of survival. Just not as a car company.
Way to use the Wikipedia Glenn
Readers who’ll be in NYC on WED., NOV. 14 may be interested in hearing TOYOTA chairman Fujio Cho speak at a noontime event at Japan Society. James McDonald, CEO of Rockefeller & Co., will preside.
The luncheon is sold out but seats still available for the lecture 1-2 pm; http://www.japansociety.org (Japan Society is on E. 47th St. between 1st & 2nd Aves.)