• Aug 7th 2008 at 6:58PM
  • 34
Toyota is not used to seeing its profit margins drop, as the Japanese auto giant has enjoyed increased profit for nine straight years. Expect that run to end this year, though, as Toyota is discovering that it is not immune to the downturn of the American auto market. For the year, Toyota has revised its sales forecast from 9.06 million units to an estimated 8.74 million. For the first quarter of the year that ended in June, Toyota has also announced that its operating profit took a 39% plunge from lower sales in both the United States and Europe, the increased value of the Yen and higher cost of raw materials. Oh, and then there's the pesky problems of leases. Still, Toyota sales remain fairly strong in this sinking market and a profit is a profit. We'd imagine that this is a problem any one of the Detroit 3 would love to have on its hands.
[Source: Automotive News - sub. req'd]

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    • 1 Second Ago
      • 7 Years Ago
      It looks like Toyota's decision in the early 2000's to concentrate on gas-guzzling Trucks and SUVs like the Tundra-Sequoia is coming back to bite them.
        • 7 Years Ago
        Huh? Everyone focused on trucks/SUVs in the early 2000's. The reason we're talking about Toyota's PROFITs is because they've always been committed to the small car market.
      • 7 Years Ago
      If Toyota's Q1 profit drops 39% ... than God only help Big 3.


      BTW, it's a drop IN the PROFIT, they are STILL profitable itself is an achievement.

      And as someone said, part of the drop is because they cannot make enough yaris, prius and corrollas.
      • 7 Years Ago
      To say that the profit fell 39% has nothing to do with the suppositly lack of Yaris or Prius. Profit = sales-cost. So in essence, Toyota has
      been hit with higher cost, resale value not quite on target compared to the residuals they have forecasted, huge decline in truck sales.
      Let's not forget that they do have their share of trucks:

      FJ cruiser
      Lexus LX,GX,RX

      They also suffer in the high end

      Lexus -25% sales in July
      -21% June
      -17% May

      Same story since the beginning of this year. So, in essence, lack of revenues from the higher end is a major factor.

      Sir, I suggest you revisit accounting 101.
        • 7 Years Ago
        The 39% decrease is year over year. They are selling up to the projection for all the small cars, they could sell more if they had them, but the lack of increased sales has nothing to do with the drop. If they could increase production to meet demand of the small cars the profit drop would be mitigated but it is not the cause. Toyota is meeting the sales targets for the small cars, most likely exceeding, the lack of sales of the trucks and other vehicles is what is hurting them. Also the increased material costs are a killer to margins.
        • 7 Years Ago
        Oops. Inability to make enough products could lead to reduced profits I mean.
        • 7 Years Ago
        If you double your sales, you double your profit. So reduced sales will generally lead to reduced profit.

        Reduced sales won't lead to reduced gross profit margins (profits divided by sales). However, given fixed overhead, it will lead to reduced net profit margins.

        Executive summary:
        It's very likely an ability to make enough products could lead to reduced profits.
      • 7 Years Ago
      "If you double your sales, you double your profit. So reduced sales will generally lead to reduced profit."

      What business school and accounting class did you take?

      • 7 Years Ago
      To bad news isn't reporting about this.
      • 7 Years Ago
      Not to mention that the drop in sales is related to Toyotas inability to keep their smaller cars in stock. I swear the Priuses (or is it Prii?) and Yarises (or is it Yarii?) are impossible to find in my neck of the woods. I have been driving through 3 seperate Toyota dealerships hoping to test drive a Yaris but to no avail. It have been looking since May. I think once they step up production to meet demand Toyota will be the Juggernaut again.
        • 7 Years Ago
        GM also reports their smallest cars are flying off the lots and they are running 3 shifts of Cobalts.
        • 7 Years Ago
        Can't your local dealership get a Yaris sent over to them from some of the other dealerships near-by? I dunno how the system works in USA, but I've had both car and bike dealers sort that out for me in UK here.
        • 7 Years Ago
        Remember the report about used Priuses' costing more than new? Hooray supply/demand :)
        • 7 Years Ago
        Looks like Ford's going to pull out of this? Think about this! Ford is about to launch multiple small cars into the market! Under three different name plates. Ford, Mercury (most of them) and Mazda (what is it the Mazda 2?). Take into consideration that Ford is going to go balls to the wall forward with this plan and that Toyota has been relying on small car sales, blend the new cars to the market, the high quality of the current Ford linup, the actual value of the UAW deals coming to fruition in a year and a half and you've got a come back with guns slinging!

        I read today that Ford is actually bigger than GM in revenue now too! BUY STOCK :)
      • 7 Years Ago
      YES YES!!! THERE IS A GOD!!!
      • 7 Years Ago
      And interestingly autoblog has the loss at 39% while everyone else says 28%,
      • 7 Years Ago
      production drop to 8.74million units a year.... looks like Volkswagen is catching up with GM and Toyota much faster as they have planed... while all big car companys run into problems lately, Volkswagen is growing pretty strong since years...
      A plus of 5.8% in the first half 2008 is the best half year ever in company history and that on a going down world market... the distance between Toyota and GM is getting smaler .. Volkswagen has claimed last month that they want to even more increase sales in the second half 2008 thanks to many new models ... their goal is to top their 2007 sales record of 6.2million cars clearly... if they can hold the plus of 5% from the first half 2008 till the end of the year 2008 they finish around 6.5million cars... in one year the distance between Toyota and Volkswagen droped from over 3million to 2.2million...
      I remember only a few months ago everyone here at autoblog was laughing and making bad jokes about Volkswagen plans to catch up with Toyota world wide sales ...
        • 7 Years Ago
        haha about you whynoLS2LS7

        Volkswagen already published their first half 2008 numbers...

        turnover 2008 56.5billion Euro +3% (~$90billion)

        profit befor tax 2008 3.783billion Euro +25.5% ($5.5bil)
        profit after tax 2008 2.572billion Euro +31.1% ($4.0bil)

        cars sold firs half 2008 3.266million +5,8%
        cars produced first half 2008 3.393million +8.3%

        netto liquidity 15.103billion Euro +28.1% ($23.86bil)
        • 7 Years Ago
        Haha. Reading your post is like reading what Toyota people were saying a couple weeks ago versus GM.

        Wait until VW announces their sales.

        The economic problems are hurting everyone, VW included.
      • 7 Years Ago
      I love the excitement of everyone hating on Toyota, while they casually miss that this is a drop in PROFIT. Meaning they're STILL making money, where as the big 3 are in the red to the tune of TENS OF BILLIONS.

      Just goes to show what a powerhouse Toyota is if they can still be pulling profits in a tough economy, which is completely the opposite of most of their competition.

      When was the last time one of the American auto makers posted a profit that didn't involve the selling off of one of their brands?
      • 7 Years Ago
      Toyota has enormous production capacity. They are like every other manufacturer -- too much product and not enough buyers. Their factories are designed to produce most efficiently at a certain rate, and they have had to go lower then is ideal (something the domestic manufacturers are very familiar with).

      Having not enough products actually lead to Toyota being able to demand a large margin for their cars -- this is changing.
      • 7 Years Ago
      What amazes me is how everyone says Detroit Quality sucks..and then rants and raves about Toyotas.

      I rode around in my friends Camry for a day recently. It's a nice car, but rather blandtastic and boring, and really the build quality is no better than my friends '06 Impala SS..which is FAR more fun to drive.
        • 7 Years Ago
        And what amazes me is that there are still people out there that buy cars, BIG3 in particular, based purely on loyalty to a company or brand. What an asinine way to consider a large purchase. So if your family worked there youll buy junk, what a joke, But midwest, Ford - GM - Chrysler people do this all the time. Some places on the West Coast the big 3 are not even a consideration due to their past track records.
        • 7 Years Ago
        Unlike some people who exhibit that amazing Jimmy Carter era American inferiority complex, I am proud to be able to say that my truck was built in Warren, Michigan. All of my cars have been American cars.The only one I've ever had any significant problem with is my 1970s muscle car..but what can you expect? It's had 33 years of drag racing and tire burning hell applied to it.

        BTW - I'm from New York, so you can take your flyover attitude somewhere else.
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