King Toyota

Wall Street Journal - May 10, 2007

TOKYO -- Toyota Motor Corp.'s modest earnings increase for the January-
March quarter shows how the challenges inherent with rapid growth have
begun to weigh on the auto maker's bottom line.

Toyota, which surpassed Detroit competitor General Motors Corp. as the
world's biggest auto maker by sales volume for the quarter, said higher
raw-material costs and sluggish demand in the U.S. were among factors
that led to 8.9% growth in the fiscal fourth quarter. The car maker
also had to invest heavily in quality control, as more manufacturing
capacity led to more recalls in the U.S. Meanwhile, research spending
rose amid new environmental demands and a faster product cycle.

Group net profit rose to 440.1 billion yen ($3.7 billion). Operating
profit fell 2.8%. Toyota projected a 0.4% rise in group net profit for
the current fiscal year ending March 2008.

Japan's biggest auto maker remains strong in the vital North American
market, where high gasoline prices have lured consumers to fuel-
efficient models such as the RAV4 http://snipurl.com/RAV4_2007 - a
small sport-utility vehicle that can average 25 miles per gallon, and
the Prius gasoline-electric hybrid vehicle http://snipurl.com/Prius -
Toyota sold 714,000 vehicles in North America in the fiscal fourth
quarter, a 6.9% increase from a year earlier.

But not all models have been selling briskly. Sales of the redesigned
Tundra pickup truck http://snipurl.com/Tundra_2007 - an important model
for Toyota as it provides higher margins than compacts such as the
Corolla, have been slow despite large discounts. Analysts say Toyota
might not meet its relatively modest goal of selling 200,000 Tundras in
the U.S. this year. The company cites a slow U.S. market and fierce
competition in the pickup-truck sector for the weak sales.

Critics also say Toyota is sacrificing some of its vaunted quality in
its rush to bring new products to market. In the past year, Toyota has
recalled hundreds of thousands of vehicles. The company has also
decided to delay introductions of some models in the U.S. by as many as
six months so engineers can conduct more quality checks.

At a news conference yesterday, President Katsuaki Watanabe said the
car maker would continue to incur expenses in order to "fully improve
our quality."

Toyota, the world's most profitable auto maker, could also face bigger
challenges as the demand for cars shifts away from the U.S. -- where
Toyota has about 17% of the market -- to emerging markets such as China
and India. Rivals such as GM and Volkswagen AG have already established
themselves in these nations, and Chinese auto makers are fiercely
competing. Toyota says it plans to boost sales in China by 30% to more
than 400,000 vehicles this calendar year.

Net sales at Toyota increased 10% for the fourth quarter to 6.33
trillion yen. Toyota reports earnings based on U.S. accounting
standards...

 

How sad it is for Toyota. <
Only 8.9% growth and 0.4% net profit increase during a period of heavy
expansion to catch up with demand.
In a weak market no less!

Today I heard Stronach top man of Canada's world wide parts manufacturer
Magna say that globally their business is growing.
They are moving into Russia.
He couldn't talk further on the Chrysler situation.
http://www.theglobeandmail.com/servlet/story/RTGAM.20070510.wrmagnamain05
11/BNStory/Business/

 

That's an interesting take from an article that said something a bit
different. Demand has dropped off, quality has dropped off and recalls have
increased due to the suffering quality.