Toyota Motor Corp. (NYSE:TM) doesn't think the car/truck business is so tough. Unlike Ford Motor Co. (NYSE:F) which lost $5.8 billion in one quarter or DaimlerChrysler (DCX) or General Motors Corp. (NYSE:GM), both spewing money like lottery winners with their first checks, Toyota is actually making money. In fact, it's the world's most profitable car maker even though GM still sells more cars. Toyota should overtake it in that department next year.
Toyota reported a net profit that was up 34% for the quarter ending in September compared to the same quarter last year. And while most other car companies are shutting factories, Toyota announced plans for expansion, especially in China, Russia and Thailand.
And don't think they're anywhere near the peak of profit potential. "Despite increased raw-material costs and business expansion expenses, we aim to achieve higher levels of revenue and profits through further increase of vehicle sales and cost reductions," Toyota's spokesman Mitsuo Kinoshita said in a statement.
Expansion. Profits. Higher Revenues. Sounds more like the hottest electronic device than the staid old car business. But then this is a company that's doing a few things right, such as: Yaris, the affordable compact car; RAV4, a compact wagon that averages 25 miles per gallon; Prius, the gas/electric hybrid car, and a few others. Just look around the next time you're on the freeway. You'll be surprised how many of the vehicles are made by Toyota, which is the parent of Lexus as well.
Sales for North America went to 717,000 this second quarter, up from 604,000 last year at this time. Global sales went to 2.054 million for the quarter, up from 1.885 million last year. The weak yen helped profits. Toyota also did more cost-cutting to boost the bottom line. Net profit went to $3.4 billion for the quarter. Revenues rose 17.1%. What makes these numbers even more remarkable is that these large profits are coming while the company is expanding. Usually expansion costs will hurt the bottom line as new expenses occur. But Toyota is sitting on $30 billion in cash, earning interest. It has plenty of money to spend for new facilities. There's a new one planned for Texas where the company will build the Tundra pick up, right in the heart of truck country.
But TM isn't perfect. It had to recall hundreds of thousands of vehicles early in the year. And some analysts wonder if in its rush to dominate the car world, some of the quality it is most famous for has been sacrificed. Remember, the management at Toyota is only human and some mistakes have to start appearing somewhere.
Unlike GM, Ford, and Daimler/Chrysler, Toyota sticks to its tried-and-true ways, only slowly evolving into new areas (such as large trucks). It's a tough competitor, one that the other mass manufacturers should learn from. But so far, Toyota's competition is doggedly sticking to what's been successful in the past, in particular SUV's. With auto lots loaded with SUV's and short supplies of fuel efficient cars, you'd think the answer for the domestic automakers would be obvious. Guess not.
- Ted Allrich