No matter what happened in Detroit, Toyota (NYSE: TM) cars were so well-built and so fuel-efficient that the demand for them would cut through the recession like a knife though butter. The notion made sense until it didn't, and the mirage went away quickly.
Toyota's U.S. sales have been falling most of the year, but the car company was doing better than most and has tremendous market share from Japan to Europe. Some analysts viewed that global footprint as a buffer.
Toyota's fortunes have not faltered, they have fallen apart. According to Reuters, "Japan's Toyota Motor Corp more than halved its profit forecasts, saying annual net earnings will plunge to a 9-year low as a financial crisis batters demand for its cars."
The headline may be about Toyota, but it says more about the fortunes of weaker car companies like GM (NYSE: GM). If the strongest auto firm in the world is suffering so profoundly, how can U.S. operations hope to move back to profitability before they run out of money? The answer is that they probably cannot.
Toyota's figures reinforce what some analysts have believed. It would be unwise of the U.S. government to put money into domestic companies that probably cannot survive a long recession. It is better to let the market take its course and allow the firms that are still relatively strong to buy those that are weak. They will get the dying companies at fire sale prices, but they will be taking on huge cost burdens at the same time. Potential acquirers including Toyota will have to carry those weights for another two or three years.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
11-06-2008 @ 7:09AM
Virgil Bierschwale said...
Folks, ya'll are missing the point altogether..
Every manufacturer will eventually suffer because we are moving all of the capital that is necessary to run our country from our country to other nations. Toyota would be doing great, as would GM (although GM is severely bloated in my opinion) if we hadnt sent all of our jobs and money offshore.
We have been doing this slowly which is why it took 40 years for it to start affecting us, but as you've noticed it is picking up speed very rapidly now.
Think I don't know what I'm talking about ?
Take a look at the article I posted today at http://www.KeepAmericaAtWork.com titled "Your wages do matter"
This is one person's story..
Multiply it by 3 to 5 million jobs, or more that probably were paid higher salaries then I was.
Two points:
1. Thirty percent of that dollar amount is directly pulled from our countries ability to meet its budget which means we have no choice but to raise taxes or cut expenses
2. Seventy percent of that dollar amount directly affects the sales of our retailers and manufacturers and raw material producers.
Sure, I doubt that the dollar amounts after their job changed to zero, but as you can see, I'm making less then 1/3rd of what I used to make.
Even if the salaries paid 50 percent less then they did before, that is still a very large amount that reduces 1) the money we need to run our country and 2) the sales of our retailers, auto makers, home builders, etc..
Folks, we're doing this to ourselves and we have nobody to blame but ourselves.
If you want to help, send me the names of the companies that send our work overseas so that I can post the CEO's name on my "Wall of Shame" so that the people of America that are hurting will have a name to direct that hurt at.
Virgil
http://www.KeepAmericaAtWork.com