rajsekar

Toyota Reviews U.S. Ops; Not Profitable Here

Richard - Your analysis is missing some key decisions that Watanabe took during 2004-05 period when Toyota was busy trying to outsell GM and Ford. As I have been commenting, San Antonio plant is Toyota's nail in the coffin. Toyota is currently having overcapacity in all their US plants, especially Indiana and San Antonio. The new Texas plant was a wrong move to assemble Tundras when Indiana plant had spare capacity to handle this. Watanabe was over confident that Tundra can woo F150 and Silverado owners. The next big hype is Prius and this hybrid dominance will be challenged by all electric plug-in cars coming from Nissan, Subaru and Chevy Volt. Consumers will flock to an all electric car, rather than buying a hybrid. For the same price of a Prius, you can buy Nissan's EV car which doesn't use gasoline. So the new Mississippi plant is another blunder. I am not certain if NUMMI closure will help Toyota, since Corolla and Tacoma are assembled in Canada and Mexico, where production costs are lower than Bay area. Moroever the US auto market and sales are contracting like never before and days of 9 million cars are gone. The fight for US auto is going to be brutal and Toyota will be left with excess manufacturing capacity and too many gas guzzlers. Well Watanabe wanted Toyota to beat GM, but he never expected that one day Toyota will become GM.

Quick Thoughts on Toyota's Recent Profitability Issues

The opening of a new plant for making Tundra full-size pickup was a colossal mistake. Even before the first Tundra rolled out of San Antonio plant in 2008, the pickup truck sales numbers went south. Toyota is now saddled with this huge investment which was planned and opened in a hurry under Watanabe's rule. After this blunder, Toyota broke ground for two new plants in US and Canada each. I won't be surprised if all three plants will end up being closed or sold to other auto makers. San Antonio plant will be a nail in the coffin for Toyota's US operations. Toyota can make a slow come back in US, but their sales of mid-end models (Corolla, Camry and RAV4) are slowing in China, India and Europe. Can sales in US and Japan save Toyota? I doubt. Nissan and Honda are in a stronger position worldwide, as compared to Toyota. Their sales slide in Japan and US are compensated well in Europe, India and China. Nissan's Canton plant in Mississippi can make 5 models under one roof (Altima, Titan, Quest, Armada, X-Terra) and no other manufacturer has such great flexible plant in the world. The plant can be retooled very quickly to assemble a new line of SUV or Sedan.