Sunday, March 22, 2009

Economic Tsunami Hits Toyota

Toyota under a year ago was considered an automotive juggernaut and the largest company in Japan. Toyota was overtaking GM to become the worlds largest auto manufacturer with its Toyota, Psion and Lexus brands. Last month Toyota announced last month that it was posting its first annual net loss in 59 years, which is anticipated to be a $5 billion dollar loss for the year end March 31 st versus $37 billion dollar profit for 2008.

Due to the economic tsunami, Toyota has applied to the Japanese government for a multi-billion dollar loan. The company is seeking government help to hold off private investors demanding as much as 50% interest on the companies debt.

Toyota last month began an unprecedented production slowdown that called for reduced shifts and a 10 day closure of its 12 Japanese based plants. Also, it has fired 9000 contract workers which accounts for more than 10% of its 85,000 employees, with warnings that more layoffs are probable.

This cascading economic slowdown has flowed to Toyota City, were 80% of the people are employed in the automobile industry. It has an equally negative effect on revenue for the city with corporate taxes estimated to be down by 96%. Toyota City use to the envy of Japan with the lowest unemployment rate but now has the highest unemployment rate in the country.

Similar to the United States, auto suppliers are also in a critical stage. Many say that Toyota's production cuts will force bankrupcies unless they can qualify for government loans.

The bottom line is that this economic crisis is the most severe that I have seen since the 1950's. The world wide economic carnige will be wide and deep.

Please see the LA Times article by John M. Glionna for more information.


  1. Hi Pete .. Toyota here is having problems too see

    Carmaker Toyota says that staff at its UK factories will have their pay and working hours cut by 10%.
    The cuts will take effect on 1 April and will last for one year. They affect 4,500 staff at plants in Burnaston, Derby, and Deeside, Flintshire.
    Toyota said the measures would allow the company to "maintain employment in this difficult period".
    Car firms in the UK and elsewhere are cutting jobs and slashing production as the downturn hits car sales.

    However this site .. appears to be quite complementary with what's going on - one article dated today 23rd March ..

    It's tough being in the car industry now .. I hope you find the two sites interesting ..I knew I'd read that Toyota had slashed working hours ..

    Thanks I might learn something soon ..
    Hilary: Positive Letters

  2. Hilary,

    Thanks for the great sites for keeping up with information on the UK!

    I agree the automobile industry is going thru major changes, meanwhile we are having an economic disaster. It is really tough! Toyota still has not come out with their sales plan for the next year. They don't have a clue!

    I have been working on a post that I plan to outline where this is all going! This is a very difficult time for many people.

    Thank you for your comments!

    Best Regards

    The Car Enthusiast Online

  3. It sure is .. and I think the only way to keep going with sanity is to concentrate on one's own welfare etc & develop one's own way of earning - to keep heads above water and develop something for the future.

    Today .. they had the Indian racing team giving a brief insight into F1 .. $120m for two cars, let alone the extras eg tyres, mirrors, consoles etc .. over 17 races and for two cars - could be another facet for you!

    Thanks .. it'll be interesting to see what happens .. people need to think beyond their small hinterland ..
    Hilary: Positive Letters

  4. Hilary,

    Thanks for the post! Racing could be a part of my blog in the future. Currently, I will probably stay on the current track, I still have many cars to post.

    The Indian economy will be least impacted by the economy. Therefore, there will be a number of posts concerning India, Tata Motors and vehicles produced by them.

    Thanks so much!

    The Car Entusiast Online

  5. Hi Pete,

    I hope that Toyota saved some of that profit from last year! I expect to see a lot of changes in the future. What is your take? Thanks.

  6. Hello Dr. Bob,

    I agree that Toyota should have substantial reserves if they had the profit that was published. I suspect that they were pressing ahead with a number of developements that were very expensive.

    I know that they were burned by spending a billion dollars on the truck plant in Texas. Then the market dropped out from under them.

    I suspect that the usury laws should be examined in Japan. Thanks for posting a comment to my blog!

    Pete Baca
    The Car Enthusiast Online