Toyota Financial Services has requested a $2B loan from the Japan Bank for International Cooperation, a government-backed lending institution. TFS says it needs the money to cover the higher cost of borrowing in the US. According to Automotive News [sub], “Toyota may be the first of a string of Japanese companies with high credit ratings to turn to state-backed loans prior to the closing of books for the business year at the end of March.” Toyota’s “implied” credit rating based on credit-default swaps is considerably lower than its current Moody’s rating, as fears grow about liquidity problems across the automotive industry. The money will come from a $5B fund established by the Japanese government to provide liquidity for firms which operate abroad. These funds are said to come from Japan’s $1T+ in foreign cash reserves, the world’s second-largest foreign currency reserves after China. Nissan and Mitsubishi have also said they will apply for loans from this fund.
Shouldn’t that be “to avoid the higher cost of borrowing in the US”?
Toyota is turning to the local Investment Bank, instead of negotiating with way too high rates from US banks hedging their bets. There’s probably a little bit of WTO maneuvering here, as well, with Toyota showing to US car makers getting bucketfuls of public funds, slanting the competitive picture.
http://news.smh.com.au/breaking-news-world/toyota-financial-unit-asks-to-borrow-public-money-20090303-8n4g.html
So is the Camry assembled in Indiana still considered an “American car” despite being subsidized by the Japanese gov?
Loan: money transferred from one party to another with the expectation that the money will be repaid at some future point in time.
Bailout: any money that goes to GM or Chrysler.
(thought I’d put out a pre-emptive strike to future bloggers who want to point to this as a reason why our tax dollars should be pissed away on GM or Chrysler.)
Quite the contrast from a little over a month ago…
“We regard the auto industry as very independent from the government,” said Noriyuki Shikata, director of the Second North America Division at Japan’s Ministry of Foreign Affairs. “Our government hasn’t extended massive subsidies to companies. A company like Toyota has accumulated some cash and should be able to survive.”
https://www.thetruthaboutcars.com/japan-we-regard-the-auto-industry-as-very-independent-from-the-government
Well I say it’s an OUTRAGE that our American car companies have to compete against this foreign devil that is being unfairly SUBSIDIZED by its GOVERNMENT and … oh … uh … nevermind.
No surprises here. After the US bailout, every single automaker in the world will ask their government (and any other gov) for free/cheap money.
It’s like asking the girl for the first dance: you just need somebody to step forward and ask a girl out, the rest will follow suit.
I saw this on the BBC news this morning and wondered when it would show up here. I was surprised, but think it’s good. I don’t see a problem with this, even if I lived in Japan. Toyota generally knows WTF they’re doing, and this is a loan that will likely be repaid. Also, it’s $2 billion dollars. Not Eleventy billion like GM and Chrysler have taken with no hopes of paying back.
GM and Chrysler are like your loser
brother/sister/other family member that keeps “borrowing” money and has no plan in place to earn fresh income in order to repay any of it.
Actually, I think this is the result of the American bailout. Without all that money that GM & Co. have gotten, France and Japan would have had a much harder case supporting their own industry.
Now we’ll see what I have feared from the beginning, a race of subsidies.
Given the overproduction, the end result will be exactly the same as if there weren’t any bail-outs to begin with…with the only difference that billions of Dollars will have been burnt in the meantime.
It’s still unlikely that the Big three can outlast the competition…Toyota FS is asking for $2 billion…how much has GM gotten so far? $6 billion for GMAC, $25 billion for “retooling”, $13.4 billion in bailout “loans” and now they want $16.6 billion more…$61 billion in total, which will last for how long exactly? July? August?
I wonder if the Japanese people will refuse to buy Toyotas now.
Does this mean Toyota has to sell their private jets now?
This is a loan, not a bailout. The difference is that Toyota won’t go under without it, and Toyota will certainly pay it back.
If I lend money to a friend, fully expecting to have it back with interest, then it’s a loan.
If I lend money to a “friend”, fully expecting to never have it back, then it’s a gift, or in other words, a “bailout”.
As for “government-backed banks”, tell me which bank isn’t government-backed? Citi? BoA?
The vast majority of American companies and individuals burrow money from these government-backed banks, does that mean that they all received bailout money?
jfsvo said:
So is the Camry assembled in Indiana still considered an “American car” despite being subsidized by the Japanese gov?
It didn’t receive any American bailout, so I guess it’s not considered an “American car”.
@wsn
If I lend money to a “friend”, fully expecting to never have it back, then it’s a gift, or in other words, a “bailout”.
If you lend money to a “friend” who has wrecked the car, burned down the house and blown up the town … you mean.
If you want to stand on principal then this is a “bailout”. $40b or $2b, a tax payer funded loan is a tax payer funded loan. But of course if your cheering against the home team you’ll see it differently even if they ask for more.
Funny how Chrysler gets slammed even when they outsell much loved VW, Mazda, Hyundai, Nissan. They were only @3k behind the first three above combined.
But still all I hear is no one wants a Chrysler product. News flash guys, nobody wants anyones cars today.
For me the most ominous part of this article (for the US, anyway) is the last part.
These funds are said to come from Japan’s $1T+ in foreign cash reserves, the world’s second-largest foreign currency reserves after China.
Those foriegn cash reserves are largely US. What happens if Japan or worse, China, dump those US securities? It won’t be pretty. And, our government’s solution of spending more and borrowing more from China et. al. only makes it worse.
“Those foriegn cash reserves are largely US. What happens if Japan or worse, China, dump those US securities? ”
They’d be screwing themselves over twice as hard, which is why they don’t do it.
@Lumbergh21:
You’re absolutely right, a crash of the Dollar at this point would be the last thing this fragile global economy needs at this point.
But also, expect this to happen at some point. Hopefully not within the next couple of years, but it’s almost inevitable.
This is a loan, not a bailout. The difference is that Toyota won’t go under without it, and Toyota will certainly pay it back.
Even Captain Kirk had to wonder why God needed a starship.
Where’s the outrage?
Oh, it’s Toyota, I forgot. If it’s Toyota, it’s a loan. My bad.
In the arms race for government support Toyota can’t stay behind.
If Detroit companies use government support to hand out sales incentives and cheap loans, Toyota also needs something to stay competitive…
Let it be known that in the “arms race” Toyota took a government check before Ford then.
Toyota also needs something to stay competitive……
Something they don’t have a problem with…
quasimondo :
Even Captain Kirk had to wonder why God needed a starship….
That’s awesome!!
“….. it needs the money to cover the higher cost of borrowing in the US.”
In our office today some contrasting thoughts on why this is, but the consensus was worrying. Why will it get more expensive? There is rapidly growing demand (~$4T) for Government debt around the world, which seems to be connected with increasingly risky efforts (AIG, GM, banks, other State Governments).
If Toyota, a financially prudent company, expect borrowing to get more expensive, that’s bad news for any recovery timeline.
WTF! The workd must be coming to an end. Next thing you know, Toyota will have a losing year. Oh, wait!
LXbuilder said:
If you want to stand on principal then this is a “bailout”. $40b or $2b, a tax payer funded loan is a tax payer funded loan.
If that’s your definition of “bailout”, then basically every American company is on bailout since FED was created.
Almost all of these companies burrow money from commercial banks. The commercial banks burrow money from the FED. The FED doesn’t really have any real money, because they already cracked down all the money savers. So the FED just print virtual money, which = tax papers pay for it in the form of dilution of the dollar value.
Lumbergh21 said:
Those foriegn cash reserves are largely US. What happens if Japan or worse, China, dump those US securities?
That’s will be inconsequential. It took China the past 30 years to save less than $2T of US bonds.
The budget deficit of the US will be $1.4T for the next year alone.
So much for 30 years of saving! And the US no longer needs financing from China or Japan. Just create even more deficit.
“The FED doesn’t really have any real money”
Really? Our money isn’t real?
Then you won’t mind sending me $1,000 to my PayPal account right? It’s just worthless Fed notes after all!
If the U.S. government even thought about setting up a special fund to help U.S. companies compete overseas through a 100% nationalized bank all the “free market” people on here would be screaming bloody murder.
BDB said:
Let it be known that in the “arms race” Toyota took a government check before Ford then.
Ford is not debt free. Ford burrowed tons of money from government backed banks such as Citi, BoA, …
There’s a difference between a FDIC backed commercial bank and a nationalized bank with a fund created by the government for the purpose of making it easier for domestic companies to compete overseas.
Trying to equate the two is REALLY stretching it.
Toyota couldn’t get that loan from a commercial bank. So they went to the Japanese government.
Ford got its line of credit from a commercial bank.
Either you think the government helping a private company is immoral, or you don’t.
BDB said:
“The FED doesn’t really have any real money”
Really? Our money isn’t real?
Then you won’t mind sending me $1,000 to my PayPal account right? It’s just worthless Fed notes after all!
When do they start to teach what the “subject” of a sentence is?
I was talking about “the Fed [money]”, and you immediately changed the subject to “Our Money”. Please stay on topic.
As for the way I used the term “real money”, it’s like this: when I save my $1000 in Citi, it’s my real money, it’s not Citi’s real money.
BDB :
March 4th, 2009 at 11:54 am
There’s a difference between a FDIC backed commercial bank and a nationalized bank with a fund created by the government for the purpose of making it easier for domestic companies to compete overseas.
Trying to equate the two is REALLY stretching it.
Look at how GMAC is allowed to exist as a commercial bank. It’s not stretching it. It happened so readily.
Yeah, the two are different. But no more than Malibu is different from Aura.
How many shares of Citi and BoA did the federal government own in December 2006 when Ford got its line of credit?
Was this fund set up by the government for the explicit purpose of helping American corporations compete overseas?
Ford has gotten ZERO in government dollars, Toyota has $2 billion.
If we use your stretched definition than every single corporation in the world has gotten a bailout whenever it borrows from a commercial bank! In which case it is a little silly to talk about a “bailout buffet” or “welfare”, isn’t it?
Question-
Why is it that we fault the american automakers for building what we wanted in the 90’s, and never said two words about it, but took our dividends without reservation?
We, the American people, did this to ourselves, and we keep deepening the levels of our hypocrisy by bashing these companies for not changing fast enough, when we are the ones acting just like our government, and just like the corporations, by not changing our fiscal ways in time to avoid this circus?
Then we look, as we have since WW2 to other countries first for our efficiency, and write off our former domestic prowess at manfufacturing goods that people actually want, and invest in non-domestic companies, and domestic companies that are shipping jobs overseas…..
Whatever. Everytime we point the finger at some executive or bash some auto company for poor management, remember that we as investors chose to take the easy way first, and not be active in our approach to influencing companies by our investment strategies.
Since Toyota is borrowing from a “government fund allocation”, they are a participant in subsidy like any other corporation. Definitely not to the degree of the American companies, but still making the deal with the devil.
Question: Who put up the backing to start the Asian companies, way back when anyway? In Toyota’s case, was it only the Toyoda family, or was it the Japanese government subsidizing them?
I submit that this has been a long term strategy by the Japanese, and Koreans to economically war against our domestic manufacturers in many industries, and also China is involved heavily also.
Why would anyone pretend to believe that “our best interest” is at heart with foreign businesses? And this is beyond automotive, obviously. It started with the defeat of domestic electronics, and now is continuing with automotive. What’s next?