The current economic environment in the United States is hurting all auto makers these days, even mighty Toyota, which was once considered immune to so-called market realities. Though its overall performance last year would be considered a stellar achievement for any other automaker, Toyota's 28% profit plunge in the fourth quarter of 2007 points to an expected 27% drop in annual profits in 2008. If Toyota's revised forecast proves accurate, 2008 would break a nine-year stretch of profit growth. In addition to the slowing U.S. market, Toyota also cites high material prices, the worldwide credit crunch and a strong yen as contributing factors in its mild downturn.Toyota's expected profit drop is certainly newsworthy, but we just have to wonder how the money-losing American car companies will cope in the U.S. market with the same issues. While sales of cars are gaining strength, the SUV and truck markets are sinking with what could be Titanic-like implications for the truck-heavy lines from Ford, Chrysler and GM.
[Source: Toyota]
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Reader Comments (Page 1 of 2)
sk @ May 8th 2008 5:32PM
Now is this good or bad news?
tekdemon @ May 8th 2008 5:48PM
Well it's bad news for the entire auto industry.
That said...Toyota tends to make very cautious estimates of their own profits.
For example, they predicted a 4.5% drop in profit for 06-07, but they ended up gaining 20%. So their predictions usually tend towards doom and gloom.
Still, the entire auto industry really is facing some serious challenges so Toyota's predictions might actually come true.
tekdemon @ May 8th 2008 5:48PM
Well it's bad news for the entire auto industry.
That said...Toyota tends to make very cautious estimates of their own profits.
For example, they predicted a 4.5% drop in profit for 06-07, but they ended up gaining 20%. So their predictions usually tend towards doom and gloom.
Still, the entire auto industry really is facing some serious challenges so Toyota's predictions might actually come true.
J. D. Billiford @ May 8th 2008 5:50PM
>>> And this comes as news to who? Unless one has been living in a cave or some other remote location for the past few years, this comes as no surprise.
Folks are struggling to pay their mortgages, assuming of course they haven't already lost their home, companies are eliminating jobs by the thousands, food and fuel prices are headed for the stratosphere ... and some wonder why profits are slumping at the automakers.
Let's face it. It's getting a rough out there. And when you're allocating most of your financial resources just to make ends meet, the last thing on one's mind is to go out and purchase a new car.
There was a saying used during the Second World War that went something like this:
Use it up or wear it out.
Make it do ... or do without.
criticalninja @ May 8th 2008 6:56PM
Before all of you start throwing dirt on Toyota, let's not forget that they still made a $3.19 billion profit for Q1. Compare that to Ford's $100 million profit and GMs' $3.3 billion loss.
Toyota may be down, but they are far from dead and buried...they are on pace for a $12 billion profit for '08. Ford and GM would love to have 1/10 of that.
KT @ May 8th 2008 7:20PM
I just read the other posts and NOT one of them said anything negative about Toyota or claimed their death.
Defensive much?
The only thing that has really changed is the yen's value. The high commodities cost and sagging market has been there for some time now.
The only variable that has really effected their profits is the value of the yen. When it was weak they could offset these other variables. Now that the "currency crutch" has been neutralized their profits are being pinched. This will continue until the dollar strengthens.
Welcome to the "real" world Toyota!!
GM Boy @ May 8th 2008 7:12PM
So there is a God... just when I started doubting he comes and does this to Yota Mota. You ROCK!
Thedevil @ May 8th 2008 7:25PM
What exactly did god do to toyota?and if you are saying god is the reason for the profit drop ,then what would you say about what he did to GM?you know ,the 3.3 billion dollar loss? Dumb A$$!
jp @ May 8th 2008 7:42PM
It isn't God that keeps sticking it to GM, it's themselves including the dealers. I'm looking for something to replace my 99 Taurus that is smaller and easy on the gas and I decided to open my eyes and give everyone a shot. The Ford, Honda, and Toyota dealers treated us with respect and the car choices were good. The GM dealers were disgustingly arrogant...often they would stare out the showroom window at us and not come out..they just couldn't be bothered. We were in my wife's 06 Pilot - not like we were in a junker. When they would grace us with their presence alll they would say is Honda & Toyota is junk....blah blah blah. Most didn't even want to give a test drive - I'm not plunking down $20K+ for something I only sat in.
caddy dave @ May 8th 2008 7:53PM
Insiders say their loss could have been cut in half had it not been for the massive amount of money spent on Tundra repairs and all the other recalls.
By the way, the G in God is capitalized.
Dumb a$$.
Thedevil @ May 8th 2008 8:31PM
So sad (crappy dave) ,you do know that there are real auto sites out there that test these vehicles on a day to day basis right?not that autoblog isn't one ,cough !!but please do some research,K?let me help you out .there is this real website name edmunds.com,yes they keep vehicles in their fleet for one year and use them as they are supose to,yep the Tundra is there likewise the Silverado,please check them out,if you dare.
http://blogs.edmunds.com/roadtests/category/cat.2007ToyotaTundraSR5DoubleCab?@50.imHycBQxMtA@
http://blogs.edmunds.com/roadtests/category/cat.2007ChevroletSilveradoLT
MoonRover @ May 9th 2008 9:24AM
Thedevil @ May 8th 2008 8:31PM
So sad (crappy dave) ,you do know that there are real auto sites out there that test these vehicles on a day to day basis right?not that autoblog isn't one ,cough !!but please do some research,K?let me help you out .there is this real website name edmunds.com,yes they keep vehicles in their fleet for one year and use them as they are supose to,yep the Tundra is there likewise the Silverado,please check them out,if you dare.
The Devil,
maybe you should get out and talk to real truck owners like myself, instead of relying on places like Edmunds. The word in the truck world is stay away from the Tundra, it is a pile of crap, and they are pretty near on. A relative owns a Toyota dealership, he will tell you the "T" in Tundra stands for "Trouble", the truck is filled with problems, mostly engineering problems, problems that cannot be repaired by a dealer. His words, "Toyota thought all that was necessary to make a large truck was make a bigger small truck", he has a pile of unsatisfied customers. Word of mouth gets around, unless Toyota makes some big improvements the bottom is going to fall out for the Tundra.
If there is one thing I have learned from the internet it's this, most of these car evaluation sites don't know beans about cars or trucks.
caddy dave @ May 9th 2008 9:03PM
The devil,
I personaly don't rely too much on blogs or Edmunds for that matter. I rely on my own judgment.
You want to talk trucks, talk to me. For the past thirty some years I have relied on trucks for a living, currently owning 14 pickups, all tow bobcats or form trailers, all are used far more than expected for heavy duty. All tolled, over 50 trucks in the past thirty years.
I also rely on a vast network of contractors and sub-contractors first hand expertise. Only two people I know have new Tundra's. (we'll use the name Tom and Jerry), Tom's is very please with his Tundra, he's a home builder. Tom usualy comes to the site in a golf shirt and dockers, never picking up a tool (probably would'nt know a claw hammer from a sawsall). The heaviest thing he hauls in his Tundra is a calculator, slide rule, tape measure and laptop. He also parks sometimes a block away from the site fearing mud.
Now Jerry, well, He uses the truck like a truck is supposed to be used. As he says, "when it's not f#@&in up." Little things like a broken tailgate and over 3K in damage when the bed slammed into the cab and broken radio, passenger window that works less than half the time and front brake pads twice in the trucks 26K miles. He swears that when the housing market picks up again the first thing to go is the Tundra.
Each year I try to buy two replacement trucks and I did give a good look at the 2007 Tundra at the Chicago Auto show. It only took five minutes to come to the conclusion the Tundra was nothing more than a wannabe.
I get the impression you are no more than about 15 years old and probably only wishing for a clue. But, if you want real truck experience, talk to me. You'll learn something
John @ May 8th 2008 8:34PM
Automotive news reported this week the new car market is going to shrink by nearly 1 million units this year. Thats a pretty big drop from an average of about 16 million per year.
Noidor @ May 8th 2008 8:49PM
Right, and forget about relying on small cars being sold, all segments are going to suffer, period. Unfortunately, most people risiding in the US have very little savings. I've been in financial industry for quite a long time, and took notice that most are over-leveraged and have no liquidity. This in turn means that obtaining financing to purchase a $14k Yaris is not going to work out, unless there is an at least $1k downpayment.
Current environment is going to predominantly hurt Chrysler, if not put them out of business, or force them to be bought outright by the Chinese.
In fact, any business related to US consumer, or any banks reliant upon collecting debt from businesses in servicing sector, are all going to get burnt big time. Think credit crunch is over? Think again.
2008 & 2009 are going to be very ugly, and I would strongly advise people to own their cars outright, and rent their properties. Futhermore, reduce use of credit cards, put most investments into swiss francs, new zealand dollars, yuans, gold, silver, platinum, agricultrual stocks, mining stocks and so forth.
Fed is following the same policy that most Eastern European counties have followed, that is devalue their way out of trouble. Unfortunately, unlike in 1980's this cannot happen because of how bad our debt is, and who holds it.
John @ May 8th 2008 9:43PM
Your right. The debt culture in this country is like a ticking bomb waiting to go off.
The only debt I have right now is my house payment and I wish I didn't even have that!
oby @ May 8th 2008 9:51PM
"which was once considered immune to so-called market realities."
What idiot would consider any corporation immune to market realities? Where do you guys get this stuff from?
MajorGeek @ May 8th 2008 11:02PM
This sucks, but is nothing new. Vehicles got bigger and bigger as people forgot about gas lines from a decade ago and the deacade before, very short memories. Now, its a market correction... again. My H2 and sports cars are now idle most days while I drive my new 08 Civic. I can afford the gas, I just refuse to pay almost $4 a gallon when 30+ MPG vehicles are readily available and affordable. My talks with local auctions and dealers tell me the small cars are all the rage, I just hope people who can't afford 15 MPG vehicles remember this.... this time around. Stop keeping up with the Jone's and keep up with your budget. No one is impressed by your SUV.
tekdemon @ May 9th 2008 3:13AM
Just regarding jp's comment, I'd like to say that there are plenty of horrible dealers with Honda and Toyota as well...just step into a used Toyota dealership-I actually had a sales manager curse at the salesman in front of me, then insult me. Of course that's just how that one (craptastic) dealership was, my family's also had smooth experiences with other Toyota dealerships, and I was even pleasantly surprised by how nice a dealership's service department was. That same dealership also had a Buick store, and they were about as nice as any dealership had ever been...I wasn't even there to buy a car (they knew I was there because my car was in the service department) and they were super friendly anyways.
At the end of the day I think the experience really depends on the dealership themselves, since there are plenty of scumbag dealerships out there for most brands. With the exception of Lexus and Saturn I'd guess.
Richard Warren @ May 9th 2008 8:06AM
Doom and Gloom, Doom and Gloom it's a naturl business cycle.
The pres and it's constant search for bad news keeps the bad news rolling.
As to loss of housing values, unless you are looking to sell, or refinance you haven't "lost" anything, it's a talking point and paper. You can't keep going up forever, it adjusts. Up and down.
If someone is stupid enough to overextend that's their own personal problem and if they were foolish to sign on the dotted line for more than a home was worth--well---look in the mirror where the problem is.