Toyota Warns It May Have To Move Production Out Of Japan.
11-07-10, 03:31 PM
#1
Guest
Posts: n/a
Toyota Warns It May Have To Move Production Out Of Japan.
This isn't good for ANY Japanese company. 
http://www.thedetroitbureau.com/2010...-out-of-japan/
http://www.thedetroitbureau.com/2010...-out-of-japan/
Full-year earnings up, but exchange rate, recalls likely to yield 2nd-half plunge.
by Paul A. Eisenstein on Nov.05, 2010
It's becoming increasingly difficult to keep building vehicles, like the Prius, in Japan, warns Toyota.
Toyota Motor Co. did markedly better during the first half of its fiscal year, a senior company official disclosed Friday, but while strong sales in key markets, such as Asia will help it deliver better earnings than expected for the current year, the rising value of the yen and its ongoing recall problems will result in a plunge in earnings during the second half of 2010.
Income for the full fiscal year, which ends March 31, 2011, is now expected to rise to 350 billion yen ($4.31 billion), up from an earlier forecast of 340 billion yen.
That projected improvement comes “despite the influence of the strong yen,” which has been a serious problem for the maker in dealing with its largest foreign market, the United States, said Toyota Managing Officer Takuo Sasaki, speaking through an interpreter, during a teleconference to discuss the company’s latest quarterly earnings.
Looking ahead, Toyota now anticipates an exchange rate of 85 yen to the dollar, down from an earlier forecast of 90. But on November 1, the exchange rate fell to its lowest level in more than 15 years, the yen plunging to 80.22 against the dollar.
“If we assume the (exchange rate) remains at 80 yen to the dollar, the environment will be extremely tough,” cautioned Sasaki, and would raise questions about how long the company can continue producing vehicles in Japan.
“Currently we are striving very hard to make sure we can remain profitable” on Japanese-made products, he said, through extensive cost-reduction efforts. The process may require may require the development of products specifically geared towards building in Japan.
But if that doesn’t work, Sasaki warned, “We will be compelled to consider other alternatives,” which, while unspoken, seems to suggest the need to shift vehicle production outside the home market.
The first half of the current fiscal year was buoyed by a variety of factors, despite the worsening exchange rate situation. Net revenues rose 15.5%, to 9.68 trillion yen, while operating income reversed last year’s 136.9 billion yen loss to reach 323.1 billion yen.
For the July-September quarter, profits rose to 98.7 billion yen, or $1.2 billion. That was up from 21.8 billion yen during the second quarter of 2009, but lower than industry analysts had predicted, signaling problems ahead.
Indeed, the numbers to follow won’t look so good, Toyota warned, with second-half profits expected to drop by as much as 77%, to 61 billion yen. By comparison, the maker posted earnings of 265 billion yen during the first half of the 2009 fiscal year.
In a little more than 12 months, Toyota has had to recall more than 10 million vehicles worldwide, the vast majority of them for a pair of problems that could cause unintended acceleration problems. The impact of those two recalls alone could cost the maker more than $2 billion, several analysts have forecast – more if the courts rule against Toyota in a series of lawsuits now working through the U.S. courts.
To underscore the ongoing recall problem, Toyota preceded the first-half earnings report with the announcement that another 135,600 vehicles sold in Europe and Japan will have to be recalled. None of the products were sold in North America.
But the exchange rate issue is a broader and potentially longer-lasting issue. It is also one that faces the maker’s Japanese competitors, as well. But, like Toyota, both Honda and Nissan are predicting better full-year earnings than initially estimated, largely the result of booming sales in China.
The good news from Asia stands in sharp contrast to its problems in North America, where vehicle sales are now expected to decline for the year, from 2.098 million to 2.09 million – and down from an early estimate of 2.17 million. Significantly, October sales fell 4% in the U.S., even while most of Toyota’s key competitors, including U.S., Korean and Japanese brands, rose by double-digit levels.
by Paul A. Eisenstein on Nov.05, 2010
It's becoming increasingly difficult to keep building vehicles, like the Prius, in Japan, warns Toyota.Toyota Motor Co. did markedly better during the first half of its fiscal year, a senior company official disclosed Friday, but while strong sales in key markets, such as Asia will help it deliver better earnings than expected for the current year, the rising value of the yen and its ongoing recall problems will result in a plunge in earnings during the second half of 2010.
Income for the full fiscal year, which ends March 31, 2011, is now expected to rise to 350 billion yen ($4.31 billion), up from an earlier forecast of 340 billion yen.
That projected improvement comes “despite the influence of the strong yen,” which has been a serious problem for the maker in dealing with its largest foreign market, the United States, said Toyota Managing Officer Takuo Sasaki, speaking through an interpreter, during a teleconference to discuss the company’s latest quarterly earnings.
Looking ahead, Toyota now anticipates an exchange rate of 85 yen to the dollar, down from an earlier forecast of 90. But on November 1, the exchange rate fell to its lowest level in more than 15 years, the yen plunging to 80.22 against the dollar.
“If we assume the (exchange rate) remains at 80 yen to the dollar, the environment will be extremely tough,” cautioned Sasaki, and would raise questions about how long the company can continue producing vehicles in Japan.
“Currently we are striving very hard to make sure we can remain profitable” on Japanese-made products, he said, through extensive cost-reduction efforts. The process may require may require the development of products specifically geared towards building in Japan.
But if that doesn’t work, Sasaki warned, “We will be compelled to consider other alternatives,” which, while unspoken, seems to suggest the need to shift vehicle production outside the home market.
The first half of the current fiscal year was buoyed by a variety of factors, despite the worsening exchange rate situation. Net revenues rose 15.5%, to 9.68 trillion yen, while operating income reversed last year’s 136.9 billion yen loss to reach 323.1 billion yen.
For the July-September quarter, profits rose to 98.7 billion yen, or $1.2 billion. That was up from 21.8 billion yen during the second quarter of 2009, but lower than industry analysts had predicted, signaling problems ahead.
Indeed, the numbers to follow won’t look so good, Toyota warned, with second-half profits expected to drop by as much as 77%, to 61 billion yen. By comparison, the maker posted earnings of 265 billion yen during the first half of the 2009 fiscal year.
In a little more than 12 months, Toyota has had to recall more than 10 million vehicles worldwide, the vast majority of them for a pair of problems that could cause unintended acceleration problems. The impact of those two recalls alone could cost the maker more than $2 billion, several analysts have forecast – more if the courts rule against Toyota in a series of lawsuits now working through the U.S. courts.
To underscore the ongoing recall problem, Toyota preceded the first-half earnings report with the announcement that another 135,600 vehicles sold in Europe and Japan will have to be recalled. None of the products were sold in North America.
But the exchange rate issue is a broader and potentially longer-lasting issue. It is also one that faces the maker’s Japanese competitors, as well. But, like Toyota, both Honda and Nissan are predicting better full-year earnings than initially estimated, largely the result of booming sales in China.
The good news from Asia stands in sharp contrast to its problems in North America, where vehicle sales are now expected to decline for the year, from 2.098 million to 2.09 million – and down from an early estimate of 2.17 million. Significantly, October sales fell 4% in the U.S., even while most of Toyota’s key competitors, including U.S., Korean and Japanese brands, rose by double-digit levels.
11-07-10, 03:58 PM
#2
Lexus Fanatic
Articles like this, though, tell only one side of the story.....but there is another one that many Americans don't know about. Toyota is lucky, in some ways, to be a Japanese company, with Japanese plants. In traditional Japanese culture, both work AND management are considered to be a priviledge. Workers consider it an honor to be employed, and managers an honor to be entrusted with responsibility....so you generally don't find people goofing-off. It is not just looked on as an 8-hour shift or 9-5 clock-watching. Not only do many (if not most) Japanese workers in the plants work their tails off, but, after work, instead of heading for the nearest bar to grab a beer or to watch a sports-event, they often meet for dinner, in each others' homes, and discuss ways to improve the factory-process. Same with managers...who often meet with the employes as well for the same purpose. THAT's dedication. 
Although, yes, there have been some recent problems (as Toyota's bad publicity has shown), that traditional Japanese system paid off.......the Japanese did not develop and perfect the the best automotive quality-control systems in the world out of nothing. Some American and Korean nameplates, like Hyundai/Kia and Ford, are now also doing very well in QC, but they learned it from the Japanese.
Although, yes, there have been some recent problems (as Toyota's bad publicity has shown), that traditional Japanese system paid off.......the Japanese did not develop and perfect the the best automotive quality-control systems in the world out of nothing. Some American and Korean nameplates, like Hyundai/Kia and Ford, are now also doing very well in QC, but they learned it from the Japanese.
Last edited by mmarshall; 11-07-10 at 04:02 PM.
11-07-10, 04:26 PM
#4
Lexus Fanatic
Maybe so, but currency-exchange rates fluctuate up and down with the wind. Today the Yen is weak.......so big deal; tomorrow it (could) easily be stronger than steel. Same, of course, with the Dollar and Euro. It makes little or no sense, to me, to pack up and leave your home-base just because the Yen is down a little, particularly when you have an excellent group of workers like you (typically) have in Japanese plants.....that was the point I was making, above.
11-07-10, 04:52 PM
#5
Maybe so, but currency-exchange rates fluctuate up and down with the wind. Today the Yen is weak.......so big deal; tomorrow it (could) easily be stronger than steel. Same, of course, with the Dollar and Euro. It makes little or no sense, to me, to pack up and leave your home-base just because the Yen is down a little, particularly when you have an excellent group of workers like you (typically) have in Japanese plants.....that was the point I was making, above.
However, I'm sure automaker profit margins are razor thin, and they cant sustain currency imbalance for too long.
11-07-10, 05:57 PM
#7
Pole Position
Join Date: Nov 2009
Location: CA
Posts: 295
Likes: 0
Received 0 Likes
on
0 Posts
With all due respect to Mmarshall and 1SickLex, the yen is not getting weaker. It is actually getting stronger in relation to the dollar. A year ago, a dollar was worth 92 yen. Today that same dollar is only worth 81 yen.
Trending Topics
11-08-10, 05:24 AM
#9
Maybe so, but currency-exchange rates fluctuate up and down with the wind. Today the Yen is weak.......so big deal; tomorrow it (could) easily be stronger than steel. Same, of course, with the Dollar and Euro. It makes little or no sense, to me, to pack up and leave your home-base just because the Yen is down a little, particularly when you have an excellent group of workers like you (typically) have in Japanese plants.....that was the point I was making, above.
. We are talking about cost of production getting worse by up to 30% in past 10 years simply because of strong yen.on the other hand, your competition has benefit of weakening currency and hence lower costs, just like that.
11-08-10, 05:36 AM
#10
Lexus Champion
In traditional Japanese culture, both work AND management are considered to be a priviledge. Workers consider it an honor to be employed, and managers an honor to be entrusted with responsibility....so you generally don't find people goofing-off. It is not just looked on as an 8-hour shift or 9-5 clock-watching. Not only do many (if not most) Japanese workers in the plants work their tails off, but, after work, instead of heading for the nearest bar to grab a beer or to watch a sports-event, they often meet for dinner, in each others' homes, and discuss ways to improve the factory-process. Same with managers...who often meet with the employes as well for the same purpose. THAT's dedication.
great description MM....I know quite a few people that rather buy a built in Japan Honda or Toyota that's rather than one built in the US.
11-08-10, 05:43 AM
#11
Lexus Champion
Join Date: Dec 2006
Location: NY
Posts: 3,370
Likes: 0
Received 0 Likes
on
0 Posts
Frankly, while I understand their position, the day they stop making cars in Japan, marks the beginning of a time when I'd never buy a new Toyota/Lexus.
And this is exactly why
And this is exactly why
Articles like this, though, tell only one side of the story.....but there is another one that many Americans don't know about. Toyota is lucky, in some ways, to be a Japanese company, with Japanese plants. In traditional Japanese culture, both work AND management are considered to be a priviledge. Workers consider it an honor to be employed, and managers an honor to be entrusted with responsibility....so you generally don't find people goofing-off. It is not just looked on as an 8-hour shift or 9-5 clock-watching. Not only do many (if not most) Japanese workers in the plants work their tails off, but, after work, instead of heading for the nearest bar to grab a beer or to watch a sports-event, they often meet for dinner, in each others' homes, and discuss ways to improve the factory-process. Same with managers...who often meet with the employes as well for the same purpose. THAT's dedication.
Although, yes, there have been some recent problems (as Toyota's bad publicity has shown), that traditional Japanese system paid off.......the Japanese did not develop and perfect the the best automotive quality-control systems in the world out of nothing. Some American and Korean nameplates, like Hyundai/Kia and Ford, are now also doing very well in QC, but they learned it from the Japanese.
Although, yes, there have been some recent problems (as Toyota's bad publicity has shown), that traditional Japanese system paid off.......the Japanese did not develop and perfect the the best automotive quality-control systems in the world out of nothing. Some American and Korean nameplates, like Hyundai/Kia and Ford, are now also doing very well in QC, but they learned it from the Japanese.
11-08-10, 06:25 AM
#12
Lexus Champion
As mmarshall has pointed out, life revolves around work. That being said, the Y generation has had a lot of influence from western cultures and this way of thinking is slowly changing. I wish the younger population here would take the good things that western society has to offer and not the bad, b/c that is what seems to be happening these days. Those people that take pride in their company and being thankful for being employed are a dying breed. Don't get me wrong, there are still some of the younger generation that think like this, just not as many as their used to be.
11-08-10, 08:18 AM
#13
They can't afford to stop making cars in Japan and I don't mean on a monetary level. I think that Toyota may explore new avenues , but not what the article is suggesting.
As mmarshall has pointed out, life revolves around work. That being said, the Y generation has had a lot of influence from western cultures and this way of thinking is slowly changing. I wish the younger population here would take the good things that western society has to offer and not the bad, b/c that is what seems to be happening these days. Those people that take pride in their company and being thankful for being employed are a dying breed. Don't get me wrong, there are still some of the younger generation that think like this, just not as many as their used to be.
As mmarshall has pointed out, life revolves around work. That being said, the Y generation has had a lot of influence from western cultures and this way of thinking is slowly changing. I wish the younger population here would take the good things that western society has to offer and not the bad, b/c that is what seems to be happening these days. Those people that take pride in their company and being thankful for being employed are a dying breed. Don't get me wrong, there are still some of the younger generation that think like this, just not as many as their used to be.
What basically happens is that when they sell Japanese vehicle in USA, they now pay 30% more for it, and at the same time Korean manufacturers pay 25% less for selling their cars in USA.
So for example:
1. Sonata (korean built) - 20k MSRP, with adjusted WON, it is as if MSRP is 16k
2. Yaris- 12k MSRP, with adjusted YEN, it is as if MSRP is 16k.
And Yaris sales are down to the gutter since Toyota can not afford to sell it here at those prices. At the same time, their competitor can lower the price of their car by 20% and still make more money on it than in 2006.
This is why in past 6-7 years, USD has been significantly devalued so US can export their goods cheaper. Currently USD is around 40% lower vs Euro, compared to USD highs of early 2000's.
11-08-10, 11:34 AM
#15
Lexus Fanatic
iTrader: (20)
also, from the article:
“Currently we are striving very hard to make sure we can remain profitable” on Japanese-made products, he said, through extensive cost-reduction efforts.
toyota will continue building cars in japan to save face, but i predict they'll build the VAST majority elsewhere.
prius built in the u.s. can't be far off. got to do something with all the unused tundra capacity.
otherwise, ford and hyundai are going to increasingly eat toyota's lunch in the u.s.