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11/08/07

Toyota 2nd Quarter Earnings Up 11%

Toyota earned $4 billion in its fiscal 2nd quarter, bringing first half profits to record setting levels.

Second-quarter sales were a record $56 billion.

The company raised full-year sales and profit projections in anticipation of continued growth.

Toyota expects to sell 8.93 million vehicles in the fiscal year. Toyota is growing faster than rivals in emerging markets like Russia, China, and Indonesia.

Slowdowns in two of Big T's most important markets, North America and Japan, were offset by these emerging market successes.

Toyota will soon will surpass GM, but I believe the Japanese behemoth's US market share will plateau at around 20% in the next few years.

The recent growth rate is unsustainable, and the recent cap on new US franchises shows the company expects a slowing.

Toyotazilla owns 16% of the U.S. car market, and earns more than 50% of its profits here.

Symptoms of a stall have dogged the company in 2007:

  • In recent months almost half a million Toyotas have been recalled.

  • Consumer Reports magazine dropped 3 model recommendations that had been considered givens.

  • Recent executive defections of talents Jim Press, Deborah Wahl Meyer, and Jim Farley, to struggling Detroit rivals, highlighted the limitations of Japanese ethnocentric corporate culture in the global marketplace.

  • Then Toyota, (foolishly, IMHO) joined the Detroit three-again in lobbying against higher fuel economy standards.

  • The "like a rock" falling dollar reduces value of US sales just as Japan's home market weakness forces the island's car manufacturers to expand abroad.

  • Chinese manufacturers are gaining ability to defend their home market and expand globally.

  • Toyota's stock price has reflected the plateau, falling 19% this year as sales and earnings rose.

    Toyota management must learn to think outside the home-island ethno-centric box, and would be wise to become global leaders if they truely wish to succeed.

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