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Why I'd Buy Toyota, The #1 Automaker in the U.S.

|Includes: Toyota Motor Corporation (TM)
Introduction

 

In Why I'd Avoid Toyota, The #1 Automaker in the U.S, Tom Lindmark sites the Wall Street Journal's report that shrunken down post bankruptcy versions of General Motors and Chrysler will leave Toyota the #1 seller of light vehicles in the U.S.

 

His essential point was that while Toyota might triumph in the long run, in the short run they must contend with "the most fearsome of competitors-government owned companies."

 

Fortunately I wasn't drinking anything when I read that line. Spraying liquid through one's nose is so undignified.

 

Actually, Mr. Lindmark has some justification, saying "In the short run it (the government takeover) could be formidable as the government does whatever is necessary to prove it didn't make the stupid decision that everyone acknowledges it."

 

But seriously, folks. Let's think about this for a minute.

 

Reasons To Be Cheerful (for Toyota)

 

Inexperienced Bureaucrats & Politicians to the Rescue:  Right.  GM could not compete when run by presumably well paid experienced executives with real budgets at their disposal. How will they compete with the same basic team under inexperienced government bureaucrats with atrophied resources, no matter what high profile wizard they find to run daily operations?

 

Government Resources Are NOT Unlimited: Given its current commitments bailout commitments, how much more taxpayer cash can the government politically (forget the overheating presses at the mint) afford to throw down another sinkhole as taxes rise and the dollar decomposes? As Treasury Secretary Geithner's meetings with U.S. creditor nations over the past month have shown, our debt holders' patience is not limitless.

 

U.S. Creditors' Patience is REALLY Not Unlimited: Since when did China, Japan, Russia, the IMF, and Moody's have all feel the need to reaffirm their commitment to the U.S. dollar as the world's reserve currency is indicative that they felt the need to do so. Doubts are growing. They need to protect both the value of their USD reserves, as well as the US consumer's ability to keep buying the world's exports. The U.S. would be wise not to try their patience too much. The Russians and Chinese know what too mucy socialism brings. The Japanese know all about what happens when you don't let"Zombie" companies expire.

 

Washington's Stellar Track Record: Even with taxpayer subsidies, when has the US government and its sheltered bureaucrats ever beaten a determined, well capitalized, well run competitor with its own cash on the line?

 

Package delivery? See Fedex, UPS, et al.

Public Education? Ask any parent who can afford the alternative.

 

A Tale of Two Companies – How Each Dealt with Competitive Threats.

 

GM

Having watched both companies since high school days in the early 1970s, two incidents come to mind about how each dealt with competitive threats.

 

In my days as an MBA student at Cornell, we had an affable GM board member/executive (I forget which, but the difference is irrelevant) as a part time teacher/scholar in residence. He appeared on occasion as a substitute teacher to tell us war stories meant to give us a taste of real corporate life. Burdened with heavy course loads, we avoided his amusing but mostly irrelevant classes whenever we knew he'd appear. However, he left me with one key lesson.

 

Whenever asked about how GM, THE symbol of American industrial might, planned to counter the clearly more reliable, fuel efficient cars that Toyota et. al  were making, he assured us GM cars were just as reliable, overall just as good, and all was well at GM.  

 

I was shocked. We were all a bit amused.

 

Of course, everyone knew this was nonsense. Even my conservative-buy-American parents, stung by both the bitter fruits of "planned obsolescence" and the fuel crisis of the early 1970s, had recently bought there first non-American made car ever – a Toyota. The differences in reliability and fuel efficiency were clear even to them and their skeptical peers.

 

Yet this captain of one of America's most important companies didn't get it. As the following years showed, he was indeed a representative sample of GM leadership.

 

 

Toyota

A few days ago, Toyota leaders met to discuss their first quarterly loss ever, newly crowned company president Akio Toyota kicked off his tenure by publicly accusing company leadership of imitating the failed habits of GM and vowed to return the company to success by slashing expenses and producing more fuel efficient, affordable cars.

 

This kind of public table pounding is, ahem, rare in the oh-so polite, face-saving corporate culture of Japan.

 

Clearly Akio intends a quick turnaround, not a 30 year slide. Face-saving be damned.

 

They already have the most fuel efficient car on the road, the Prius. The firm plans to have a fuel cell car by 2015. No resting on laurels here.

 

 

Conclusion: So How To Profit?

 

When the banking crisis is truly over and stocks bottom out (not yet, see my prior posts for more) Toyota might be an investment for those who want to an auto industry play.

 

Don't worry about Toyota. Save your concern for the auto workers and suppliers stuck with GM.

 

"Ladies and Gentlemen. In this corner, wearing the World Champion belt, Toyota Motors, led by Akio "the Ninja" Toyoda. In this corner, wearing nothing but a barrel, G.M, led by Obama Administration and UAW approved, former Postmaster General, Political Hack Extrordinaire…

 

Oh well, may Obama can get Theo Epstein to take a leave of absence from the Red Sox. Hey, they hadn't won for 80 years.

 

 

Disclosure: The author owns a Prius, and (sigh) some GM bonds.