Even Toyota can't escape the recession
Posted
Dec 22 2008, 05:08 PM
by
Kim Peterson
Rating:

Detroit's Big Three deserve the criticisms they're getting about mismanagement and bad planning, but even well-run automakers are getting hit in the recession.
Toyota showed that it's just as vulnerable as other car companies Monday when it said it would have its first operating loss in 70 years. For its fiscal year, which ends March 31, the company is facing a $1.7 billion loss -- its first since 1938.
That's a long drop from the $25 billion in operating profit the year before. But Toyota has a powerful weapon to get through this crisis: an $18 billion cash hoard with little debt. Shares fell just 6% on the news today to close at $60.36.
The huge drop in auto sales, particularly in the U.S., has hurt Toyota, which does a third of its business here. A strong yen was also hurting profits.
"The tough times are hitting us far faster, wider and deeper than
expected," Toyota's president said. "This is an
unprecedented crisis requiring urgent action."
The urgent action, for Toyota, means freezing plans to expand plants in Mississippi and other parts of the world. Toyota also lowered its sales forecast.
In some ways, the bad news is just beginning. Analysts don't think people will start buying cars again until late 2009, which means that Toyota and other automakers will have to take more drastic action to stay in business. It would be a shame to see Toyota burn through that carefully nurtured mountain of cash to get through the next couple of years.
“It is just a matter of time before all major automakers are losing money,” an auto analyst told the New York Times. “And things will just get worse next year, when companies start losing money for the second consecutive year.”
Look for Toyota's stock price to suffer as well, after managing to stay in the $60 to $70 range for the last three months. The stock started out this year above $105.
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