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> Tough times for Toyota |
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Tough times for Toyota
posted by
Vivek Sharma
29 Aug 2009, 09:23
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labels: companies, economy, automobiles
It used to be said, ‘what is good for GM is good for America’. That may not be true anymore with GM just a pale shadow of its former dominant self. But, the premise that car sales are a good barometer of economic activity still holds true. That is precisely why the governments of US, several countries in Europe, China and Brazil paid special attention to boost car sales as part of the economic stimulus efforts. In the U.S. and Europe, the governments offered cash incentives for trade-ins while China and Brazil gave tax incentives. These efforts yielded very good results, even spectacular results in the case of China where car sales are growing 40% to 50% from last year. When that is the case, it should be a cause for concern when the world’s largest, most efficient and best managed car company is cutting production and scaling down capacity. Toyota will cut output this year, by closing down assembly lines in Japan and the US. This is the first time in the company’s history that it is forced to shut a US factory. That is only a sliver of the bad news from Toyota. The company estimates that its global auto sales will decline more than 30% this year, from nearly 10 million units to under 7 million. In response, Toyota is reducing its annual capacity by 1 million. Capacity reduction will continue next year at Toyota Japan, where sales have declined 23% this year. Toyota’s desperate measures, despite the heavy support provided by governments to the auto industry in the form of stimulus measures, speak volumes about the strength of the global economic recovery. Notwithstanding the surging confidence in the stock markets and a profusion of green shoots, a full recovery may take a while.
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