A "Pleasant Problem" at Toyota and Honda: Full Capacity

Bloomberg reports Toyota and Honda are in search of capacity as their North American sales and market share continue to grow at the expense of the Big-3. Not only are plants at full capacity, but exports from Japan jumped 36% in 2006 (through Nov.). Japan auto increased its combined market share in the U.S. to a record 34.8% in '06, led by a 12.5% sales gain by Toyota and 3.2% by Honda, versus declines of 8.7% for GM and 7.9% for Ford. Japan's Big-3 plan capex of ¥2.69 trillion ($22.6b) in the current fiscal year ending in March. Both Toyota and Honda are building new plants in N. America, while Nissan is looking to buy existing capacity to avoid the costs of building new facilities. Honda's President commented last month that operating at full capacity "... is a pleasant problem to have." Shares of Japan's Big-3 fell in a broad market sell-off as the yen strengthened against the dollar. Toyota lost 2.4% to ¥7,900 ($133.62 ADR equiv. at ¥118.25/$1), Honda -3.0% to ¥4,600 ($38.90) and Nissan -0.8% to ¥1,443 ($24.41).

• Sources: Bloomberg
• Related commentary: Wagoner: GM Won't Go Down Without a Fight, Toyota Leads December Sales Growth, But Ford Holds On To #2, Toyota Production Surges to Meet Global Demand, Japan Auto Exports Remain Robust
• Potentially impacted stocks and ETFs: Toyota (TM), Honda (HMC). Competitors: General Motors (GM), Ford (F), DaimlerChrysler (DCX), Nissan (NSANY). ETFs: iShares MSCI Japan Index (EWJ), iShares S&P/TOPIX 150 (ITF), BLDRS Asia 50 ADR Index (ADRA)

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