Page 56 - Toyota Under Fire

THE OIL CRISIS AND THE GREA T RECESSION

a crisis for the automotive industry, since most vehicles are fi-
nanced. If consumers couldn’t get auto loans, they couldn’t buy
cars. But of course it wasn’t just a question of a lack of credit.
Even consumers who still had access to credit or who could fi-
nance a car through other means stopped buying, afraid of what
the future held. Pocketbooks everywhere were closed and locked.
There was an unprecedented collapse of automobile sales,
not only in the United States, but around the world, and not just
of large vehicles, but of all vehicles. The variety of countries in
which Toyota operates and the variety of vehicles it makes prof-
itably give it theoretical protection against economic instability:
downturns in some parts of the world or some parts of the mar-
ket will normally be offset by upswings in others. But in this case,
all of the Group of Seven industrialized economies turned down-
ward, and many others besides. There was no place to hide.
As each month passed, Toyota’s North American year-over-
year sales numbers plummeted further. By May 2009, sales were
40 percent below what they’d been the previous year. To add
insult to injury, the U.S. dollar weakened by 15 percent in rela-
tion to the Japanese yen between July and December of 2008.
Every 1 percent reduction in the strength of the dollar translated
to roughly a $36 million decline in operating income for Toyota
in yen terms. The combined impact of plummeting sales and the
currency adjustment led to Toyota’s first loss as a company since
1950—a loss of more than $4 billion for fiscal year 2009 on global
sales of 7.6 million units, a drop of 1.3 million units from 2008.*

* We should note that in 2008, General Motors lost $30.9 billion, $9.6 billion
in the fourth quarter alone.The firm’s survival required that it be taken over
by the U.S. government and that it cut tens of thousands of jobs. Ford, mean-
while, lost almost $15 billion in 2008 and had already lost $30 billion in the
three years since 2006.

25