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Toyota (TM)
Toyota Beats Wall Street But Posts a Loss
The recent economic downturn has wrecked havoc on the automobile industry. Investors have witnessed the collapse of a corporate icon, General Motors. The car business environment has hit such a low that even the world's largest automaker cannot outdrive the economy's "profit-draining" grasp. Toyota Motors (TM: Charts, News, Offers) announced today that it posted an $818 million loss this quarter, which is certainly far below Toyota's notoriously high standards. Despite the disappointing profit margin, the Japanese carmaker did beat out Wall Street expectations and seemed optimistic about the future. What was the cause for Toyota's plunge in profit? What are the automaker's plans for the future?
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As with most automakers, the biggest cause for Toyota's profit drop has been weak automobile sales. Toyota saw a 38.3% decrease in its worldwide car sales for the quarter. However, Toyota did receive help from various government stimulus programs aimed to spark consumers to purchase more "gas friendly" vehicles. In the United States, the "cash for clunkers" initiative boosted sales in an otherwise stale market. See if you qualify for the cash for clunkers stimulus here. In addition, Toyota Motors ran into problems with the currency exchange rates. Toyota Senior Managing Director, Takahiko Ijichi , noted that the strength of the Japanese yen has really cut into the carmaker's profit margin. Now that Toyota has identified the source of its troubles, how does it intend to remedy the situation?
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Toyota has been making a conscious effort to cut costs, which has helped lead to its better-than-expected quarter performance. No cost reduction effort has been overlooked by the Toyota powers at be. The automaker has gone as far as turning the heat down in its factories and encouraging employees to take the stairs in an attempt to streamline electric bills. Toyota intends to not only to continue but intensify these "emergency profit improvement" efforts. During the quarter, the cost cutting plan has saved Toyota $2.4 billion, and the world's largest automaker expects the total savings to be $9.5 billion by March 2010. Another bright spot for Toyota this quarter has been the sales of its hybrid vehicle, the Prius. The Prius' demand is outpacing the current supply and has been the number one selling car in Japan for two months straight. Unfortunately, Toyota has struggled to produce enough battery packs to power the vehicle, which has hindered its ability to capitalize on the demand. However, the automaker is now in a position to produce more than twice as many battery packs as before, and is anxious to build off the Prius' recent success.
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Toyota Motors has been struggling lately, but this quarter has offered a glimmer of optimism for investors. The world's largest automaker is steadily inching towards a positive profit margin, but has had problems battling the floundering economy and strength of the yen. Toyota has seen great potential in its Prius sales. Toyota Motors hopes to increase the hybrid's production so it can capitalize on the building demand. In addition, the carmaker's dedicated cost cutting efforts are paying big dividends. Toyota is optimistic that the combination of the Prius hybrid and "emergency profit improvement" initiative will provide it enough fuel to drive out of the red.
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