More bad news for the auto industry

[TraumaRN]

From the Detroit Free Press-Toyota forecasts its first reported operating loss

NAGOYA, Japan ? Toyota Motor Corp. slashed its earnings forecast today, projecting that it would report its first annual operating loss for the fiscal year through March ? its first such loss since it began reporting results in 1941.

Battered by falling demand from consumers around the world and a surging yen, Toyota and other Japanese automakers have been reducing earnings outlooks and cutting workers.

"The change that has hit the world economy is of a critical scale that comes once in a hundred years," President Katsuaki Watanabe said at the company's Nagoya office. The drop in vehicle sales over the last month was "far faster, wider and deeper than expected."

Toyota forecast an operating loss of $1.66 billion for the fiscal year ending March 2009. Toyota has never reported an operating loss since it began disclosing such figures in 1941. But it did have an operating loss in unofficial, internal calculations for the year ending March 1938, a year after the company was founded.

Operating income reflects a company's core business performance and does not include income taxes and certain other expenses. Last fiscal year, Toyota had an operating profit of 2.27 trillion yen.

Japan's top automaker also lowered its net profit forecast to just 50 billion yen for the year through March 2009 ? a tiny fraction of the 1.7 trillion yen it earned last year.

Falling sales in the United States in the wake of the financial crisis have dealt a heavy blow to Japanese automakers. But Watanabe said that emerging markets, which had held up in the beginning, were also slowing down now.

The surging yen has battered profits as well by eroding overseas earnings when converted back to yen. The dollar has fallen to 13-year lows of about 90 yen recently.

This is the second time Toyota ? which makes the popular Camry sedan and Prius gas-electric hybrid ? has reduced it annual earnings forecast this year. Initially, it had been projecting $13.9 billion in net profit for the year through March 2009, but last month it reduced that to $6.1 billion before chopping it further today.

It also lowered the number of vehicles it expects to sell globally this calendar year to 8.96 million, down 4% from a year ago, Watanabe told reporters.

Unlike previous years, he gave no goal for vehicle sales for 2009. He also gave no earnings forecast for the following fiscal year, ending March 2010, noting the company didn't have a sales plan yet.

Tsuyoshi Mochimaru, auto analyst for Barclays Capital in Tokyo, said that Toyota will likely continue to struggle next year because U.S. auto sales won't start recovering until toward the end of 2009, and the dollar may also lag.

"The problem is next year," he said, while adding that the latest revisions were within expectations. "It's unmistakable that things are extremely tough for Toyota."

So you see Senator Shelby it's not just the Big 3...But then again I'm sure Toyota has much money in the coffers still but someone should ask him what he thinks about this. Maybe he'll say they should be allowed to fail too.

Anyways sarcasm aside, just more proof that economy isn't pretty even for normally fiscally stalwart companies like Toyota. Obviously some of it is out of there hands but with Toyota saying they have no projections for next year means they are obviously figuring out just how bad it will be for them since they probably will continue to experience sales drops just like everyone else.

 

[SP33Demon]

Considering noone's buying cars right now, getting a loan is very difficult, and the rising unemployment figures this isn't surprising. This is horrible news for the Big 3 though.

 

[Specop 007]

If I were a large business owner I would make a point to operate at a loss then turn around and ask for Federal Funding. We've gotten to the point we're doing nothing more then rewarding bad business decisions and practices. At this point one has to ask themselves why bother running a company for profit?

 

[The-Noid]

As I have said before, Toyota is the most overrated company of all time.

They will lose their triple AAA credit rating this year as well, not that I believe in any rating. TM is a stock that should have a 30 handle on it, not a 90 handle. As for debt outstanding, they should drop to A-.

 

[Fingolfin269]

Originally posted by: Yoxxy
As I have said before, Toyota is the most overrated company of all time.

They will lose their triple AAA credit rating this year as well, not that I believe in any rating. TM is a stock that should have a 30 handle on it, not a 90 handle. As for debt outstanding, they should drop to A-.

The most overrated company of all time? And the fact that they will post their first operating loss at a time when the entire industry is crumbling is a good point to back up your assertion?

 

[The-Noid]

No, the fact that the common American and the media worship them as if their corporate structure and governance is some how superior to all other companies on the planet.

TM has the same poor structure that the Big 3 have, the only positive they have is cheaper labor. Increasing sales past 14MM (for the industry) autos/year is just not going to happen in this environment (and probably not ever) and simple linear regression shows the affect of consumer sentiment on auto sales. It should be viewable to anyone that as consumer sentiment dropped from 80 to 45, there would be a sever drop-off in sales.

A wise person once told me, "you can have a business that is capital intensive or a business that is labor intensive, you can not have a business that is both." The only reason the auto industry is its current state is the large amounts of incentives and access to cheap/free financing. The auto industry will not and should not exist in any form that is similar to what we have had here in the USA for the last 6 years.

Again, TM is not immune to any of the problems in the broader market or any of the problems specific to TM itself. It is and has been for the last few years the most overrated company in the world.

Full disclosure <-- Short TM, from 105. Limit to Cover at 55 and stop to cover at 65 currently.

 

[spidey07]

They are hurting pretty bad. All the capital that was to be invested in US has almost disappeared to be used to maintain and cover the huge operational black hole.

 

[Starbuck1975]

No, the fact that the common American and the media worship them as if their corporate structure and governance is some how superior to all other companies on the planet.

It is superior...go read up on the Toyota Production System.

 

[mooseracing]

Originally posted by: DeathBUA


So you see Senator Shelby it's not just the Big 3...But then again I'm sure Toyota has much money in the coffers still .

I think you mean the chinese mob or whoever it was in one of the other reports has plenty of money to support them

 

[SP33Demon]

Originally posted by: Yoxxy
As I have said before, Toyota is the most overrated company of all time.

They will lose their triple AAA credit rating this year as well, not that I believe in any rating. TM is a stock that should have a 30 handle on it, not a 90 handle. As for debt outstanding, they should drop to A-.

So being the #1 car company in the world means you're overrated? Pray tell, who should be number one above them? lawl

How the hell are they going to lose their AAA credit rating? Please tell us in detail how that will happen, this should be good.

 

[The-Noid]

Originally posted by: SP33Demon

Originally posted by: Yoxxy
As I have said before, Toyota is the most overrated company of all time.

They will lose their triple AAA credit rating this year as well, not that I believe in any rating. TM is a stock that should have a 30 handle on it, not a 90 handle. As for debt outstanding, they should drop to A-.

So being the #1 car company in the world means you're overrated? Pray tell, who should be number one above them? lawl

How the hell are they going to lose their AAA credit rating? Please tell us in detail how that will happen, this should be good.

Moody's said Monday it was reviewing Toyota's long-term debt rating for a possible downgrade following the carmaker's revised estimate.

Credit analysis is based on a company's ability to pay today and also going forward.

As I already posted, the ratings given to TM are favorable based on an industry that will never be able to sell 14MM or more vehicles moving forward.

No one is doing well in the car manufacturing space currently, but the idea that TM is somehow going to pass this entire tornado without even a nick is laughable.

The swaps market is also pricing in 240 bp of spread, hardly what most would consider the rating of a AAA company. It is hard to say with the credit implosion that has taken place in the last 6 months that any company deserves a AAA rating right now, and most sovereign debt should also be placed on ratings watch (it is 55 bp to insure a 10 year treasury right now). It is also laughable to say that any company/bond which is completely reliant on credit and the consumers ability to gain said credit should have ever been given a AAA rating to begin with.

Rating's agencies have given many investors a false sense of confidence in companies that do not deserve this confidence. Credit analysis needs to take the span of the term of the bond, using more simulations than what were used in the "pay for good ratings" era of today. The huge influx of "fallen angels" to the likes of what we have never seen before, just shows the lack of any concrete models for the ratings given by these companies. If you really want to hear a rant, let's start talking about muni bonds and the baseless ratings that were given out to this class.

Companies that are still AAA worthy and you are welcome to disagree:
ADP, XOM, JNJ, PFE.

 

[The-Noid]

Originally posted by: Starbuck1975

No, the fact that the common American and the media worship them as if their corporate structure and governance is some how superior to all other companies on the planet.

It is superior...go read up on the Toyota Production System.

TPS was usurped by TPM, LM, QRM, TOC, Six Sigma, RCM and numerous other OM and Internal Control strategies. Welcome to 1975.

 

[SP33Demon]

Originally posted by: Yoxxy

Originally posted by: SP33Demon

Originally posted by: Yoxxy
As I have said before, Toyota is the most overrated company of all time.

They will lose their triple AAA credit rating this year as well, not that I believe in any rating. TM is a stock that should have a 30 handle on it, not a 90 handle. As for debt outstanding, they should drop to A-.

So being the #1 car company in the world means you're overrated? Pray tell, who should be number one above them? lawl

How the hell are they going to lose their AAA credit rating? Please tell us in detail how that will happen, this should be good.

Moody's said Monday it was reviewing Toyota's long-term debt rating for a possible downgrade following the carmaker's revised estimate.

Credit analysis is based on a company's ability to pay today and also going forward.

As I already posted, the ratings given to TM are favorable based on an industry that will never be able to sell 14MM or more vehicles moving forward.

No one is doing well in the car manufacturing space currently, but the idea that TM is somehow going to pass this entire tornado without even a nick is laughable.

The swaps market is also pricing in 240 bp of spread, hardly what most would consider the rating of a AAA company. It is hard to say with the credit implosion that has taken place in the last 6 months that any company deserves a AAA rating right now, and most sovereign debt should also be placed on ratings watch (it is 55 bp to insure a 10 year treasury right now). It is also laughable to say that any company/bond which is completely reliant on credit and the consumers ability to gain said credit should have ever been given a AAA rating to begin with.

Rating's agencies have given many investors a false sense of confidence in companies that do not deserve this confidence. Credit analysis needs to take the span of the term of the bond, using more simulations than what were used in the "pay for good ratings" era of today. The huge influx of "fallen angels" to the likes of what we have never seen before, just shows the lack of any concrete models for the ratings given by these companies. If you really want to hear a rant, let's start talking about muni bonds and the baseless ratings that were given out to this class.

Companies that are still AAA worthy and you are welcome to disagree:
ADP, XOM, JNJ, PFE.

Nobody said TM wouldn't come out of this without a nick... I will give you that a company completely reliant on consumers' ability to gain credit does hurt them short term (2009 sales should pick back up if unemployment drops), and that their stock is overinflated (as were 95% of stocks before subprime crash). But quality wise, Toyota didn't get to be the number one company/reputation in the biz because they were "overrated" (check JD Power & Assoc 2008, Consumer Reports). I guarantee you that if any company should be granted AAA credit it's going to be the number 1 car company in the world. They have a 104Bil market cap, to say it doesn't deserve AAA credit in the long term is absurd. Even if "14MM" cars aren't sold, they will still continue to be the leader in sales which will drive consumer confidence in TM. So yes, like you said, even if they don't deserve that much confidence they will get it as long as they put out quality cars.

You still haven't answered who you think should be the #1 car company if you think they're "overrated"? Be sure to provide facts regarding why you think another company should warrant a higher consumer confidence level than TM.

 

[The-Noid]

The Nissan-Renault and Porsche-VW-Audi alliances are in stronger fundamental shape than that of Toyota. You are thinking far too linearly as if there is no company outside the USA.

Nissan-Renault; Japanese quality with ability to sell Semis and other business vehicles Renault in mainland Europe. Also have a strong intra country appeal in France to Renault.

Audi-VW-Porsche; cars for many segments with a still perceived quality advantage in Europe compared to that of the Japanese transplants. Also cheaper manufacturing costs than that of Toyota on the low-end (VW) and a dealer network throughout the USA that is not over saturated.

There are also many companies bigger than TM by market cap that do not deserve a AAA rating. Stock price should not go into fundamental credit analysis, as stock price simply reflects the firms ability to raise capital and lower their WACC should they choose to issue a secondary of equity or preferred as opposed to debt. If you are taking equity into account, look at Toyota dropping by 50% this year.

The leaders in sales figure is also debatable. GM actually has a much larger footprint in the developing world than TM. TM has seen the majority of its gains from GM's losses in the USA. Outside of the USA GM actually makes money, without the USA as is seen by TM estimates today and listening to the analyst call, TM can not make money.

TM will get a downgrade and is the most overrated company on the planet. The downgrade will come in the next 90 days. You can come back to this post in 90 days and I will fully admit I am wrong should it come to that, I would aspect the same out of you as well.

Also, when you debate you can not give blanket statements like Toyota is the #1 car company in the world. This is according to what? Quality, sales, ...
For me Ferrari, Rolls Royce or Aston Martin are the #1 car company in the world. A statement like that is completely subjective.

 

[spidey07]

Originally posted by: SP33Demon
You still haven't answered who you think should be the #1 car company if you think they're "overrated"? Be sure to provide facts regarding why you think another company should warrant a higher consumer confidence level than TM.

Really good marketing, that's how. With all the models they have now they are repeating the quality problems the big 3 ran into. Recent recalls and jd powers is all you need for proof of this. Or the disastrous new camry launch.

 

[compuwiz1]

I work in the industry and the biggest challenge we are having right now is getting auto loans for people. In general, FICO scores have slipped and there was a time in recent history when a 620 - 650 score was very financeable, just at a sub or near prime interest rate. In the past few weeks my lenders have been closing the doors on those kinds of loans, while cherry picking the 700+ scores, which are not plentiful right now.

The higher scores are not as plentiful as they were, but also the people with the higher scores are taking a more conservative stance and we are just not seeing them on the lots right now.

 

[TheSlamma]

Originally posted by: Yoxxy
As I have said before, Toyota is the most overrated company of all time.

I've never taken anyone seriously who always goes right to the furthest extreme. Of all time? What are you 17?

Seriously, a company that has produced some of the most reliable cars for decades that have high resale values is the most overrated OF ALL TIME? :thumbsdown:

 

[Aimster]

My GFs dad made $145,000 last year selling cars for Chevy. I bet he won't even come close to half of that this year.

 

[The-Noid]

Yes, of all time.

You can read the almost constant pros in this thread with very few cons. Toyota's have faults and recalls. My GX470 had more recalls than any car I have ever had.

Having said that, http://74.125.47.132/search?q=...gl=us&client=firefox-a

Someone else also agrees.

Nissan/Infiniti also have the highest resale of any cars.

17 yes, you got it. I must be quite smart for 17.

 

[boomerang]

For those of you having difficulty dealing with the toppling of Toyota, I present the five stages of grief.

1. Denial and Isolation.
2. Anger.
3. Bargaining.
4. Depression.
5. Acceptance.

Most of you appear to be in stage one. Experts say that the overwhelming majority of people will go through all five of these steps. Some will remain in any one specific step longer than others.

Just know that you are not alone.

 

[TheSlamma]

Originally posted by: Yoxxy
Yes, of all time.

You can read the almost constant pros in this thread with very few cons. Toyota's have faults and recalls. My GX470 had more recalls than any car I have ever had.

Having said that, http://74.125.47.132/search?q=...gl=us&client=firefox-a

Someone else also agrees.

Nissan/Infiniti also have the highest resale of any cars.

17 yes, you got it. I must be quite smart for 17.

So another kid who goes to the extreme and has never heard of thousands of other overrated companies where some were so bad they don't even exist anymore. Man that is IMPRESSIVE!

I'm also looking for data on GX470 recalls and am not seeing much (Other then it's a useless SUV) for the 2008, 2007 and 2003.

 

[The-Noid]

2005, 7 reprograms of the bios, 4 updates of the nav that made it turn off and turn the fan for the a/c on full. Also numerous problems with the automatic up windows and a faulty sensor making it go down.

There is a difference between companies that are dead and gone and overrated. TM is overrated, they could kill kittens with rust knives on Christmas via national TV and people would still think TM was the greatest company ever. Oh well, I will just stay short and keep making money, hopefully you aren't on the other side of that trade.

 

[Starbuck1975]

TPS was usurped by TPM, LM, QRM, TOC, Six Sigma, RCM and numerous other OM and Internal Control strategies. Welcome to 1975.

Those approaches and processes did not usurp the TPS...they are either extensions of TPS, modifications to the TPS or improvements to the TPS.

American auto manufacturing has been playing catch-up with the Japanese since 1975...the latest buzzword is Lean, but it all boils down to the same thing...removal of waste from the system, focus on quality, JIT manufacturing, etc.

For those of you having difficulty dealing with the toppling of Toyota, I present the five stages of grief.

The Big Three will go under well before Toyota.

Also, when you debate you can not give blanket statements like Toyota is the #1 car company in the world. This is according to what? Quality, sales, ...
For me Ferrari, Rolls Royce or Aston Martin are the #1 car company in the world. A statement like that is completely subjective.

Seems like you have a chip on your shoulder when it comes to Toyota...many would correctly criticize Toyota for not having inspired design...they are not creating the most sexy cars in the world...what Toyota excels at is quickly bringing to market high quality functional vehicles targeted at specific demographics.

Ferrari, Rolls Royce and the likes are rooted in the tradition of European "craft" auto manufacturing...the demographic for those cars have a different threshhold of criteria for quality and reliability.

 

[marincounty]

OMG the sky is falling. Toyota lost money. Of course they lost money, no one (in their right mind) is buying cars right now.
Last time I checked , Toyota had something like $17 billion in cash, so I think they can make it. Maybe they will be bought by Ford?
Perhaps Detroit should have banked some of the money they made selling the useless SUVs instead of giving it out in bonuses and giving it to the sharelholders?

Toyota still makes the most reliable cars and when people do buy cars they will buy Toyotas again.

 

[SP33Demon]

Originally posted by: Yoxxy
The Nissan-Renault and Porsche-VW-Audi alliances are in stronger fundamental shape than that of Toyota. You are thinking far too linearly as if there is no company outside the USA.

Nissan-Renault; Japanese quality with ability to sell Semis and other business vehicles Renault in mainland Europe. Also have a strong intra country appeal in France to Renault.

Audi-VW-Porsche; cars for many segments with a still perceived quality advantage in Europe compared to that of the Japanese transplants. Also cheaper manufacturing costs than that of Toyota on the low-end (VW) and a dealer network throughout the USA that is not over saturated.

There are also many companies bigger than TM by market cap that do not deserve a AAA rating. Stock price should not go into fundamental credit analysis, as stock price simply reflects the firms ability to raise capital and lower their WACC should they choose to issue a secondary of equity or preferred as opposed to debt. If you are taking equity into account, look at Toyota dropping by 50% this year.

The leaders in sales figure is also debatable. GM actually has a much larger footprint in the developing world than TM. TM has seen the majority of its gains from GM's losses in the USA. Outside of the USA GM actually makes money, without the USA as is seen by TM estimates today and listening to the analyst call, TM can not make money.

TM will get a downgrade and is the most overrated company on the planet. The downgrade will come in the next 90 days. You can come back to this post in 90 days and I will fully admit I am wrong should it come to that, I would aspect the same out of you as well.

Also, when you debate you can not give blanket statements like Toyota is the #1 car company in the world. This is according to what? Quality, sales, ...
For me Ferrari, Rolls Royce or Aston Martin are the #1 car company in the world. A statement like that is completely subjective.

It's hard to take you serious when you say that it's "debatable" when it comes to sales. No, it's absolutely not debatable, and this is old news from April. GM says Toyota is number 1 in global sales.

Furthermore, ranking Nissan ahead of Toyota is far fetched, especially regarding global sales and quality. Again, read JD&Power (since you quoted it) for 2008 reliability rankings. Read Consumer reports for rankings, Toyota again comes out ahead. VW, are you kidding? They got some of the worst dependability rankings of 2008. Porshe, Lexus destroyed them on dependability ratings as well , although Porshe edged them out on overall quality/performance-design.

Last, like another person posted, calling Toyota the most "overrated" company on the planet means you don't think rationally, especially when you have a biased (i.e. money at stake) opinion. Of course you're going to fight tooth and nail and make false statements (like global sales/VW is better) to try and trick people into dumping Toyota because you admitted to shorting it.