By Jay Wong
Toyota Motor (TM) announced today that it would cut its 2011 profit forecast by 54% as floods in Thailand affected its supply chain and the company estimated that production would fall by 230,000 vehicles due to the shortfall. The company has also struggled with currency issues, as the yen's recent weakness has made it difficult for them to turn a profit on American sales. In addition, the company is finally now recovering market share that it lost to Ford (F) and GM (GM) from the unintended acceleration cases filed earlier in the year.
While Toyota has managed to avoid the descent that American manufacturers fell into earlier this decade, the company has faced some problems which have shaken its reputation. The previous generation Camry faced some reliability glitches with its V6 variant, and Consumer Reports removed it from its recommended list. Toyota also had many of its vehicles temporarily pulled from CR's recommended list after the unintended acceleration reports surfaced. The agency is considered to be the most reputable of all automobile review publications, and many consumers base their purchasing decisions off of their recommendations.
CEO Akio Toyoda has acknowledged that the brand has suffered some glitches over the past years, and has already taken steps to energize its product offerings. The company collaborated with Subaru to produce a new sports car, and will bring it to the US under the Scion brand. The Scion FR-S is the first true driver's car in the company's lineup for nearly a decade, and uses a rear wheel drive setup. Combined with its light weight and precise steering, the car has generated many positive reviews, with one review stating that the car had "Porsche Cayman levels of precision."
The company has instilled a similar philosophy in its Lexus luxury brand of cars. While many of its cars have earned stellar reviews for being quiet, reliable, and having high levels of craftsmanship, they have always lacked the driving dynamics of their German competitors BMW and Mercedes. The company recently unveiled the 2013 Lexus GS sedan, and early road tests have shown that the car has much better handling capabilities than its predecessors. This is a positive, as the upcoming IS and LS sedan redesigns will take their cues from the GS.
Due to the falling yen, the company has considered building Lexus cars in the United States, a difficult decision due to the company's pride in building its best cars in its homeland, Japan. The company hopes to increase the margins of these cars by taking advantage of lower manufacturing costs. The company is also moving its Lexus global marketing team to California, the beginning of what could be a major management exodus to the U.S.
Despite the struggles, Toyota continues to release new models that consumers want to buy. The redesigned Camry has an all new interior and more tech features, and will likely retain its status as the best selling car in the United States. If the company can successfully leverage the strength of the US currency, it could generate substantial profit growth in the coming years.