A short overview of what happened in other parts of the world while you were in bed. TTAC provides round-the-clock coverage of everything that has wheels. Or has its wheels coming off. For the next two weeks, WAS will be filed from Tokyo.
Toyota doesn’t just sit there. They do something: Toyota is facing its first full-year loss ever, $1.68b for the whole fiscal 2008. Never mind that this is approximately the cash GM burns through in a bad month. For Toyota, it is a huge embarrassment. Toyota will do immediately what GM ignored: Embark on drastic production changes. “The speed, breadth and depth of the global economic downturn is beyond what we had imagined,” says Toyota President Katsuaki Watanabe. Their measures will be likewise drastic. Toyota aims to revamp its operations so that it can turn a profit even if parent-only sales fall by 17% from 2007 results. All new production upgrades, including the opening of a plant in the U.S. state of Mississippi scheduled for 2010, will be postponed or scaled down. Capital spending planned for fiscal 2009 will be cut 30 percent to less than 1 trillion yen. For starters. By the way, directors will forgo their bonuses this fiscal year.
Nissan likewise: Nissan is reevaluating its plans for new factories and may postpone construction or scale back the size of some of them, Chief Operating Officer Toshiyuki Shiga said to The Nikkei (sub.) Nissan had plans to build a new factory in Russia in 2009 and new plants in India, Morocco and China in 2010. In addition, its subsidiary Nissan Shatai Co. had plans to build a new car body assembly plant next year in Kyushu. All of these plans are under review.
Japanese auto industry sheds half of workforce: Until last Monday, Daihatsu was the only one of Japan’s 12 automakers that had not yet announced layoffs. Daihatsu no longer has that exclusive. They will not renew the contracts of 500-600 of 1,000 temporary workers, the Nikkei (sub) writes. Suzuki also announced Monday that it will lay off all 960 of its workers that are not regular full-time employees by next May. All 12 Japanese automakers have announced layoffs totaling a combined 17,000 people, or half of the roughly 34,000 contract and temporary workers they employed. Most companies plan to reduce domestic production further, which could cut into Japan’s holy grail: Full-time employees.
Korea slimming: South Korean’s carmakers don’t are hot on the heels of the Japanese rivals and announced their own austerity measures: Hyundai, and their affiliate Kia, together the world’s fifth-biggest carmaker, are freezing administrative wages and slashing working hours at production plants in Korea, the Financial Times writes. “The carmakers’ belt-tightening coincided with alarming data from customs authorities that exports, the heart of Korean economic activity, had so far plummeted 25.5 per cent in December.” Korea’s Automobile Manufacturers Association has forecast a 5.6 per cent drop in car exports next year.
Moody’s may downgrade Toyota: Moody’s Investors said Monday that it is considering lowering Toyota long-term debt rating from its highest rating of AAA, in light of the impending loss, the Nikkei (sub) writes. Toyota has been AAA-rated by Moody’s since August 2003. S&P already warned that they may do likewise, but they haven’t done so yet.
And now, good news (however tiny: ) Toyota received 8,000 orders for the iQ ultracompact it released on Nov. 20, more than triple its monthly sales target of 2,500, the Nikkei (sub) reports. The iQ is some 40cm shorter than other minicars in its class.
China‘s car dealers endangered species: 80 percent of China’s auto dealers have become loss-making businesses, and may even go bankrupt, said Chinas official news agency Xinhua today. Many dealers in China have been selling cars at a loss in an attempt to reach the year’s sales target. Their light at the end of the tunnel may be after-sales service. Other stores cannot get more cars to sell at a loss, because they are short of cash flow and unable to take out loans from banks. These dealers have to close their doors or declare bankrupt after clearing their cut-price vehicle inventories. Sound familiar?
Daimler uses new math: How about that for thinking outside of the box: In November, Daimler sold 25 percent less across all brands, Mercedes-Benz, AMG, Smart and Maybach. What shall they do? They will increase prices. From January on, Mercedes-Benz cars will cost 1.9 percent more, Smarts will smart from an increase of 2.17 percent, Automobilwoche (sub) writes. Understandably, Daimler’s dealers are “extremely irritated.”
No TÜV-TÜV wedding: In Germany, and in many parts of the world “TÜV” is a household word when it comes to testing and certification. What most don’t know: There isn’t one TÜV. There are many. Six at last count. And they are all in fierce competition. The two largest, “TÜV Süd” and “TÜV Rheinland” wanted to merge. These plans have now been cancelled, reports das Autohaus, much to the relief of thousands of TÜV workers, who already saw themselves as fish meat due to the dreaded economies of scale.
By the way, directors will forgo their bonuses this fiscal year.
What a novelty. Wagoner couldn’t hold Katsuaki’s jock strap.
Marketwatch is reporting Watanabe may be replaced after the end of Toyota’s financial year (so march?)
Let me (hopefully) try to preempt all of the idiots who will point to Toyota’s “troubles” and say, “See! The economy is the problem! It’s not that the Detroit crowd have been horribly mismanaged for the past few decades!”. Yes, Toyota is going to have a bad year by their own lofty standards. And then they will TAKE ACTION, MAKE TOUGH DECISIONS, and FIX THEIR PROBLEMS! THIS is the difference between the D2.8 and their much better run competitors. Also, as Tulsa mentioned in the previous post, they will likely make management changes thereby reinforcing the culture of performance within their management ranks. GM? Not so much.
Daimler uses new math: How about that for thinking outside of the box: In November, Daimler sold 25 percent less across all brands, Mercedes-Benz, AMG, Smart and Maybach. What shall they do? They will increase prices. From January on, Mercedes-Benz cars will cost 1.9 percent more, Smarts will smart from an increase of 2.17 percent, Automobilwoche (sub) writes. Understandably, Daimler’s dealers are “extremely irritated.”
That’s why they’re called Dumbler. Or to their customers Nickel and Dimeler.
Of course we have the mandatory comparison to GM….sheesh!
Is it possible to somehow exclude GM from stories that don’t concern them? I mean, they have their own problems…
Bridge2far,
Sorry if I offend you, but now that I’m a part owner of GM (by virtue of my taxpaying status) I tend to view the automotive business world through that lens. Not that I had a choice in the matter, by the way.
Tex
Hmmm…instead of a guarenteed loan to the US automakers, we could take measures to weaken the USD making it more expensive to import. Of course that would be market manipulation, especially when industry threatens to move off-shore.
No kidding, how dare you compare one car company to another car company on a website about cars and car companies?
Note too that this is Toyota’s first full-year loss in 70 years – GM has lost 74 Billion since 2005 and Rick Wagoner dreams about losing only 1.68 Billion in a year (much less a month).
Mercedes-Benz cars will cost 1.9 percent more, Smarts will smart from an increase of 2.17 percent
The Smart gets an extra boost because it’s just so damned versatile and appealing.
For those of you who haven’t taken the time to truly digest the Toyota loss, allow me to clarify. Toyota’s fiscal year ends March 31, 2009. In the first two fiscal quarters, Toyota reported operating profits of $9.7 billion. So for them to LOSE $1.7 billion for the entire fiscal year, they are going to lose $11.4 billion for this and the next quarter!! And according to Toyota’s own financial statement last quarter, they have around $19 billion in cash. Does everybody still think that Toyota is ahead of the game here?
“Does everybody still think that Toyota is ahead of the game here?”
Yep.
Those crazy Toyota guys, I don’t know about them! What with their long term planning and immediate action with the news of the loss. It’s like they want to stay in business or something.
Does everybody still think that Toyota is ahead of the game here?
Lessee,
Money in the bank? check.
Agressive plan to slash costs? check.
Reduce/eliminate exec bonuses? check.
Eliminate needless racing programs? check.
Institutional comprehension that businesses exist to serve customers and that’s how they make money? check.
Not whining that the world owns them a living after 40 years of mismanagement and non-competitve product? check.
Kinda looks like they’re ahead of the game, at least versus the DET non-plan.
OK, Toyota lovers, riddle me this – How can a difference of 1.4 million vehicle sales in one year lead to an operating loss of $26.9 billion year over year? And that’s real money, not like the accounting charge of $39 billion GM took last year.
gm-uawtool:
For those of you who haven’t taken the time to truly digest the Toyota loss, allow me to clarify. Toyota’s fiscal year ends March 31, 2009. In the first two fiscal quarters, Toyota reported operating profits of $9.7 billion. So for them to LOSE $1.7 billion for the entire fiscal year, they are going to lose $11.4 billion for this and the next quarter!! And according to Toyota’s own financial statement last quarter, they have around $19 billion in cash. Does everybody still think that Toyota is ahead of the game here?
OK, Toyota lovers, riddle me this – How can a difference of 1.4 million vehicle sales in one year lead to an operating loss of $26.9 billion year over year? And that’s real money, not like the accunting charge of $39 billion GM took last year.
For those of you who still don’t get it, Toyota is forecasting a loss. They are predicting it, it is NOT YET 100% guaranteed to happen. When Toyota reports financial results in a few months up until end of March, what if Toyota surprisingly posts a profit and exceeds everyone’s expectations? Toyota has done that before, and it’s quite possible it will do it again.
You greatly underestimate the speed and swiftness of Toyota acting to solve their problems and adjusting to market conditions. Despite being a larger company than Honda, Toyota can adjust to the market more quickly than Honda for example.
Also Toyota has a lot more than 19 Billion in cash, regardless of whether or not it is indicated in their last quarter financial results. Even if it is 19 Billion, combined with all of Toyota’s assets, they have well over 30 Billion in available funds.
Once again, Toyota HAS NOT yet actually HAD a loss. That is their prediction. Also, the value of the yen versus the US dollar has changed massively in the last few months. Toyota will lose billions in profit just on the value change to the yen alone.
Johnson, you are correct that the yen valuation is a big reason why Toyota is losing money hand over fist. Conversely, this was essentially free money for the Japanese to use to improve the content of their vehicles when the yen was artificially weak for so many years. Now that the golden goose has stopped laying eggs, their business model is in tatters.
Porschespeed – many of the things you listed GM has been doing/already done. Yes Toyota has a stronger cash position but you have to admit the size of the losses they are projecting are ginormous.
Eliminate needless racing programs? check
Have I missed something? I keep waiting for Toyota to dump their pointless F1 experiment but no sign yet. It’s distracting, expensive and has little to do with the brand. Drop the F1, ‘yota!
@gm-uawtool: Yen artificially weak? Excuse me? I came first to Japan 4 years ago. And because I met my wife here, I come here many times. I wouldn’t call a country’s currency where a taxi ride from the airport to the city costs $300 “artificially weak.”
Actually, I thought the currency of a country that had basically no growth since 1990 should be much weaker. I am flatly amazed that the currency of a country that pays 0.04% interest on bank deposits is in high demand.
As a matter of fact, the Yen is artificially high. It is, because a lot of funds had borrowed Yen at low interest rates , and invested it in Aussie and NZ dollars at high interest rates. The banking crisis brought an end to the so-called “carry trade.” The funds had to come home to Japan, which created an artificially high demand for Yen, which brought the Yen up.
A few days ago, it reversed course. With any luck, Toyota’s losses will be less in March.
Bertel Schmitt – I’m familiar with the yen carry trade, and from what I’ve read, that dog ain’t gonna hunt anymore. Everybody’s got low interest rates now, as well as a strong aversion to risk, two hallmarks of the carry trade. As far as whether the yen is artificially weak, your $300 taxi ride may not be the best illustration. When was that ride? Are you converting yen to dollars to come up with that amount? You and I both know that the BOJ sold billions of dollars worth of yen in the past to keep it weak. They’re jawboning now, but the gig is up and the yen will hopefully never see 110 again.
Porschespeed – many of the things you listed GM has been doing/already done. Yes Toyota has a stronger cash position but you have to admit the size of the losses they are projecting are ginormous.
The losses they are projecting are mostly driven by the strong yen. Ginormous? In context, not so much. To you and me? Yeah, big honkin’ pile-o-cash.
If you are real, and not some troll from the Tubes, on one hand I do salute you for being a company guy, and toeing the party line. But, if you want to know what really happens at GM, read the filings. Look at the budgets. They say they’re doing a lot, and to be fair they are cutting here and there. But there is SO much waste in the myriad fiefdoms at GM it will really make you sick if you figure it out. There are people who keep 300MM projects going for no reason other than their own job. They know the project is going to produce no results, but hey, they can keep cashing their check as long as it keeps running. Happens every day.
Not to mention the corporate culture of the overhead (white collar) staff. Hundreds of meetings for nothing. People who’s only job it is to produce one report a week. Nobody even reads the report, but it must be produced, because it always has been.
GM should have been profitable up until about 6 months ago. Legacy costs or not.
Porschespeed, I am real, not some tube dweller. I have seen first hand at the plant level the extent of the cost-cutting going on. I guess my point is that Toyota seems to get a free pass from the media while it’s all hands on deck when it comes to GM. I really believe that Toyota will have to do some serious capacity reduction, which will mean laying off permanent employees. That is going to be a huge deal for them, believe me. FYI, Watanabe is on the way out. That tells me there is more trouble on the way.
gm-uawtool :
“FYI, Watanabe is on the way out. That tells me there is more trouble on the way.”
So Wagoner staying at GM while they lost over $50 Billion must mean everything is peachy? That makes me feel better about giving them my tax money!
In November, Daimler sold 25 percent less across all brands, Mercedes-Benz, AMG, Smart and Maybach. What shall they do? They will increase prices.
Oddly enough TTAC recently ran an article on a prediction that car prices would increase next year. Given that even the more profitable car companies only make 6% on a car there is obviously not much room to manouevre when the cost of parts increases. Most suppliers have been squeezed as far as they can for costs, and some a bit further, so there is no short term alternative to passing on rises in raw materials costs.
“For those of you who still don’t get it, Toyota is forecasting a loss..”
And I believe the loss will be even greater than expected. Sorry Toyota fanboys.