Toyota (NYSE:TM) is cutting production capacity as fast as it can. The US is not the only place where its sales are down. In its native country the recession is so bad that car sales could hardly get worse.
As Toyota increased the number of places where it could build cars in a push to become the world's largest car company, the quality of its products started to fall. It was much harder to make sure vehicles were "defect free" when manufacturing was done all over the world and not just in Japan. In the US, quality measurements like JD Power's surveys of vehicle defects started to rank some car firms above Toyota after it had been at the top of the list for years.
Getting overextended has cost Toyota in overblown expenses and the first loss in the company's history. Toyota would probably love to have fewer of the production facilities it built.
Just as Toyota is pulling back, the effects of its expansion are hitting it harder. In China, according to Reuters, "Toyota Motor Corp is recalling 121,930 cars in China to fix a problem that could result in loss of steering control."
Toyota now faces two major problems, which may be one of the reasons it is putting in a new president. Expansion that did not foresee the huge drop in vehicle sales is costing the firm money and its most valuable asset -- its reputation.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
12-26-2008 @ 9:41AM
Phil said...
I wonder where all the big three bashers are ? And Toyota is now burning cash like the big three. Add the rise of the Yen and the falling U.S.dollar and a Wall street meltdown , $4.00 a gal gas last summer in the U.S. ,and don't hold your breath just as soon as the recession starts to die.. OPEC oil and the useless speculators will pump up the price and send us back into the recession... And the Workldwide recession will continue !But then Toyota workers have lifetime employment . And they have their jobs bank .And 18 billion in reserves is a drop in the bucket .Remember G.M. was in the same position about a yr ago. But then GM had a falling dollar not a rising Yen. Big diff ...
12-26-2008 @ 10:10AM
Dan Barnett said...
And how about all those who wanted to blame all of Detriot's problems on the UAW?
12-26-2008 @ 10:13AM
aturnbull8 said...
I wonder were Toyota and the other Asian car companies would be if the were paying the health care cost for there workers.
12-26-2008 @ 10:31AM
FGW Hopkins said...
China ops for TMC have a long way to go before becoming anything like a TMC run plant. I wonder where the defective part was sourced?
12-26-2008 @ 12:10PM
proudGMworker said...
I don't hear anything from the Toyota loyalists! The fact is, Toyota's quality is behind the Big 3! This past year, Toyota has recalled more vehicles than the Big 3 combined! That's 3 million vehicles around the world! With their marketing skill though, they call the recalls " quality enhansments ", and people believe it! That's the sad part of it all........
12-27-2008 @ 5:25AM
BELLCORD said...
TRUE, BUT THE BUSH ADMINISTRATION CALLED HOME FORECLOSURES " OPPORTUNITIES IN OUTDOOR LIVING" TOO..
12-27-2008 @ 8:25AM
Hoxsie said...
There is a big technical glitch within the comments to the article about "Donald Trump Sues Town for $100 million" if you scroll thru the comments you will find page after page after page of unreadable comments!!
1-05-2009 @ 5:20PM
Eddie said...
I work for Toyota and you are all right. Toyota's quality is going downhill fast. Toyota only cares about making money and will do it at any cost. They have cut so many jobs at their U.S. plants, no wonder quality is starting to suck so bad. Toyota doesn't care one bit about their employees. Please, everyone out there stop buying into that philosophy that Toyota takes care of their own. They are cutting jobs, benefits, and pay as if it were throwing away bubble gum. Toyota does not care about it's employees. The UAW is the only thing that can stop Toyota from bringing down all of the automaker's salaries and benefits. Toyota used all it's employees to get to the top and now they are crapping on them all to try and stay there.
1-07-2009 @ 4:19AM
Jonas said...
The only true income for Toyota is their income from financing. For this reason, Toyota stock may fall as far as 20$ when they release their Q4 and Q1 figures. Toyota may be seen as a financial institution and not as a carmarker. When it hits the bottom, I'll buy their stock. Now, it are mostly pension funds and investment firms that are filling their portfolio's. This will continue till the end of week 1. After that, it will go downhill.