TOYOTA RECALLS, THE ECONOMIC CRISIS IN 2008 AND RECOVERING AFTER THE TSUNAMI IN 2011

TOYOTA PROBLEMS

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2010 Avalon RECALLED
In the mid 2000s Toyota began suffering from a number of problems---most notably recalls whose sources could traced to design, development, production, suppliers and maintenance---and the departure of a number of talented executives---notably James Press. In 2007, Consumer Reports stopped automatically giving a “recommended” rating to all of Toyota’s cars.

As Toyota has become very large questions have been raised about its ability to maintain high standards of quality. Several large recalls have raised serious doubts. In March 2008, Toyota President Katsuaki Watanabe admitted that rapid growth---namely time pressures and a shortage of experts---had been at least partly to blame for problems Toyota had been having.

Toyota has been slow off the mark in China, India and Brazil, emerging markets expected to provide much of the growth in automobile industry in the coming years. It’s timing has been off in China. It got off to a late start and was not as ready as its rivals when the market really began to take off there in the late 2000s. In early 2009 it sales were down 17 percent while those of GM, Volkswagen and others were booming.

Toyota’s advantage in hybrids and electric cars is expected to be reduced as other car makers introduce their hybrids and electric cars. Other car makers have caught up in other ways and are often just as reliable, leaving Toyota with cars that are regarded as dull.

Toyota’s aggregate market value fell 54 percent to about $100 billion in 2008. Some analysts say that Toyota has way too much production capacity in the United States and Japan and it hasn’t really made much money on its small vehicles. Management is considered arrogant. Some say to a degree that makes it vulnerable to same kind of mistake that brought GM down.

See Problems with Just in Time Production and Unhappy and Dead Toyota Workers under TOYOTA PRODUCTION AND WORKERS

Websites and Resources

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2009 Corolla RECALLED
Good Websites and Sources: Toyota toyota.com ; History of Toyota toyota.co.jp/en/history ; Toyota Automobile Museum toyota.co.jp/Museum ; New York Times articles on Toyota nytimes.com ; Car Connections on New Toyotas thecarconnection.com/make/new,toyota ; Toyota factory tour Japan Guide and Toyota site ; Toyota Motorsports toyotaracing.com/ ; Toyota Robots toyota.co.jp/en/special/robot ; Toyota Concept Cars toyota.com/concept-vehicles ; Book: The Elegant Solution: Toyota’s Formula for Mastering Innovation by Matthew E. May (Free Press, 2006)

Hybrids and Electric Cars Wikipedia article on Hybrids Wikipedia ; Toyota Hybrids toyota.com/hybrid ; Wikipedia article on Electric Cars Wikipedia ; All Electric Cars Blog allcarselectric.com ; Toyota Electric Cars allcarselectric.com/blog ;

Links in this Website: INDUSTRIES IN JAPAN Factsanddetails.com/Japan ; JAPANESE COMPANIES Factsanddetails.com/Japan ; TRADE AND OVERSEAS BUSINESS IN JAPAN Factsanddetails.com/Japan ; MACROECONOMICS IN JAPAN Factsanddetails.com/Japan ; JAPAN INC. AND REFORMS Factsanddetails.com/Japan ; JAPANESE AUTOMOBILE INDUSTRY Factsanddetails.com/Japan ; AUTOMOBILES AND DRIVING IN JAPAN Factsanddetails.com/Japan ; HYBRIDS, FUEL CELLS AND ELECTRIC CARS IN JAPAN Factsanddetails.com/Japan ; JAPANESE AUTOMOBILE COMPANIES Factsanddetails.com/Japan ; TOYOTA Factsanddetails.com/Japan ; TOYOTA PRODUCTION AND WORKERS Factsanddetails.com/Japan ; TOYOTA PROBLEMS Factsanddetails.com/Japan ; TOYOTA CARS, RACING AND ROBOTS Factsanddetails.com/Japan ; HONDA Factsanddetails.com/Japan ; HONDA CARS, PLANES, ROBOTS AND RACING Factsanddetails.com/Japan ; NISSAN Factsanddetails.com/Japan ;

Good Websites and Sources on Industry: Good Photos at Japan-Photo Archive japan-photo.de ; Companies Listed by Industry mizuho-sc.com ; Ministry of Economy, Trade and Industry meti.go.jp/english ; Statistical Handbook of Japan Manufacturing Chapter stat.go.jp/english/data/handbook ; 2010 Edition stat.go.jp/english/data/nenkan ; News stat.go.jp

Toyota and the Economic Crisis in 2008

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2010 Camry RECALLED
Toyota had aimed to sell 10 million vehicles a year by 2010 but suffered a severe set back when it t was stung hard by the global financial crisis in 2008 and 2009. Toyota sold 7.56 million units in fiscal 2008-2009---enough to outperform GM and make Toyota world’s largest automaker but 1.34 million less than the previous year. Toyota had originally forecast sales of 9.85 million in 2008 and 10.4 million in 2009. It sold 7.81 vehicles in 2009, down 13 percent from the previous year.

Toyota posted a $4.61 billion loss in fiscal 2008, the first time in 71 years it posted a loss. The previous year it made a profit of $22.7 billion. The loss was a particularly nasty considering it made a huge profit in the first six months of 2008. In the first three months of 2009 it lost more money than GM. In the 2nd quarter f 2009 Toyota lost $1.8 billion.

The losses and sales drops were the biggest crises that Toyota faced since the company was founded. Vehicle production for the company in Japan in February 2009 was only 141,127 units, the lowest output figure on record.

Several of Toyota’s key suppliers and contractors teetered on the edge of bankruptcy as their orders were reduced to near zero. The influence of Toyota’s sudden decline of production on workers, suppliers and other business that rely on a strong, healthy Toyota was called “Toyota shock.” The term was also used it describe the fact that even Toyota was not going to escape big time problems associated with the global economic crisis. Bad news from Toyota was enough to send the whole Japanese stock market tumbling.

Toyota’s losses were attributed to shrinking auto sales associated with the global financial crisis, depreciation of the yen and rising material costs. Many blamed the scale of Toyota’s losses on rapidly expanding in problematic areas---namely gas-guzzling SUVs and pick ups---at an inopportune time. The global economic crisis left it with surplus production capable producing 10 million cars when only 7.5 million were sold.

Things could have been worse. Reasonable sales in China, elsewhere in Asia and Russia offset slow sales in Japan, the United States and Europe. By August 2009, things had picked up enough that Toyota began making plans to restart weekend production at plants that produced the Prius and other cars. By September it had resumed hiring temporary workers.

Toyota returned to profit in the third quarter of 2009. The company reported a ¥2.1 billion profit after losses in the previous three quarters. Toyota cars were the top sellers in the “Cash for Clunkers” program in the United States. In October sales climbed five percent for the first time in 15 months.

Toyota’s Response to the Economic Crisis in 2008

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2010 Corolla RECALLED
Toyota responded to the crisis by shutting down production of its large vehicles for several months, switching a factory that made SUVs into one that made Priuses, and scaling back production in India and other countries. Toyota President Katsuaki Watanabe said, “We are facing unprecedented emergency circumstances.” With demand of automobiles low, Toyota reconstructed its production operations by setting up hybrid cars as the core of its manufacturing.

Toyota downgraded it sales forecasts for 2009 from 10.4 million to 9.7 million to less than 8.5 million to 6.3 million and took out loans from the government. Previous efforts to cut cost by $3 billion a year no longer seem sufficient. Despite the set backs Toyota insists it will not scrimp on research and development, especially in getting new hybrids, electric vehicles and fuel-cell cars to market.

Toyota eliminated its entire temporary work force of around 10,500 on fixed-term contacts that worked as its 12 domestic plants. Some full-time regular workers took extended leaves of absence or worked part time. The company also cut pay for factory executives and eliminated bonuses for all salaried workers. In Britain, Toyota made a deal with unions there to reduce wages and working hours by 10 percent in exchange for job security. In North America, it froze wages and offered voluntary lay offs.

In February and April 2009 Toyota halved domestic output and suspended operations at 11 factories. In Mississippi it paid debt service costs to state and local borrowers after delaying a plant opening. In September 2009, Toyota said that it would sell its brokerage unit to concentrate on selling cars. In November it announced it was going to close 300 of its 4,900 dealerships in Japan over the next three years

In August 2009, Toyota and GM announced they going to end production at their joint venture at their Freemont-California-based NUMMI plant, which employed 4,000 people. The venture was launched in 1984. Toyota won concessions from the United Auto Workers to lower labor cost at the plant and raised he possibility of producing vehicles independently at the facility. NUMMI was finally closed in April 2010.

Toyota Recalls in the Mid 2000s

In January 2007, Toyota recalled a half million pick-ups and SUVs to correct a suspension problem that could make the vehicles difficult to steer. The company knew of 11 Accidents related to the defect that caused six injuries before taking action. A similar recall in May 2005, affected 750,000 trucks and SUVs. In December 2007, Toyota announced the recall of 470,000 vehicles for engine, steering and motor problems. In 2008, 90,000 Highlander SUVs were recalled in the United States for adjustments to their third-row seat seatbelts.

In 2006, Toyota recalled 1,2 million vehicles, prompting the Transport Ministry in Japan to demand the company improve quality control. In July 2006, Toyota was forced to recall 420,000 cars over a faulty engine part. The part could cause oil leaks that could cause the engine to stop. In October 2005, Toyota recalled 160,00 Priuses due to a software problem that could make the gasoline engine stall.

Still Toyota’s quality remained high. In the J.D Powers survey of quality in 2006 it ranked 2nd behind Hyundai for non-luxury brands. Lexus finished 2nd behind Porsche for luxury brands Twenty one of the 47 highest ranked cars in a Consumers Report survey of quality cars in 2006 were Toyotas.

Toyota Recalls in 2010 and 2011

Between November 2009 and December 2010, Toyota recalled 14 million vehicles worldwide, including 11 million in the United States.

In March 2011, Toyota recalled 145,000 Brazilian-made Corollas to fix flaws in the fuel tank and other systems. In April 2010, Toyota announced a recall of 50,000 Sequoia SUVs to adjust stability control systems in the vehicles which drivers said was too aggressive in the United States. The same month it recalled 100,00 Corollas in Brazil over acceleration problems. Officials in one of Brazil’s largest state Minas Gerias ordered a halt in sales of Corollas over safety concerns.

In July 2010, Toyota recalled 428,000 vehicles due to defects in the steering wheel column. The same month Toyota recalled 270,00 Lexuses to have their engines checked for a possible defect in the endive valve springs that could cause engine failure. In August Toyota recalled 1.3 million Corollas, Matrixes in North America because their engines might fail. In September it recalled 116,500 four wheel drive vehicles in Australia due to concerns over fault support brackets. In October Toyota recalled 1.5 million cars worldwide---including 700,000 cars in the United States and 600,000 in Japan “to fix a brake fluid leak problem. The models affected included Avalons and Highlanders and several Lexus models.

In November 2010, Toyota recalled 65,000 Passo and IQ vehicles in Japan because of potential problems with computer programming of the power steering, defective coolant pumps, In December it recalled 110,000 Siena vans in North America due to concerns that drivers could damage the brake system as they used the parking brake. Also in December, Toyota recalled 650,000 Priuses worldwide, including 378,000 cars from model year 2004 through 2007 in the United States, to replace potentially defective coolant pumps that could cause the car to lose power.

In January 2011, Toyota recalled 1.2 million vehicles, including Noahs, RAV4s and others, in Japan due to a possible fuel leakage. In February 2011, Toyota recalled 2.4 million vehicles, including 2.17 million in the United States, saying accelerator pedals could be interfered with by floor mats. Among the models affected were the 2007 Lexus GS, the 2004 through 2006 Highlander and 2006 though 2010 RAV4. In April 2011, Toyota recalled 350,000 cars in North America---including some 2007 and 2008 Highlanders and RAV-4 SUVs---because of problems with their roll-detection devises. It also recalled 54,000 Tundras in the United States and Canada due to a faulty drive shaft.

In June 2011, Toyota recalled 110,000 hybrids in Japan, United States and Europe over faulty transistors in electricity power control boards. Also in June Toyota recalled 106,000 Priuses globally over concerns over faulty steering caused by a nut that may come loose.

Toyota Recalls 729,000 Vehicles in March 2012

In March 2012, AFP reported, Toyota said it was recalling nearly 730,000 vehicles in the United States and Canada to fix potential problems with the driver's airbag and a switch that can prevent vehicles from starting. Toyota said it is not aware of "any accidents or injuries caused by these two conditions" and added that the affected models were not distributed outside North America. The faulty cable recall affects 495,000 Tacoma trucks in the United States and 17,178 in Canada with model years of 2005 to 2009. [Source: AFP, March 8, 2012]

“Due to the combination of steering wheel spiral cable design and characteristics unique to the Tacoma chassis, friction between the spiral cable and the retainer in the steering wheel spiral cable assembly may occur in some vehicles," Toyota said in a statement. "Friction over time may result in loss of connectivity to the driver's air bag module. If connectivity is lost, the air bag warning lamp on the instrument panel will remain illuminated after starting the vehicle and the driver's air bag may be deactivated, preventing deployment in the event of a crash.” [Ibid]

“The stop lamp recall affects 70,500 Camry and 116,000 Venza vehicles in the United States along with 2,740 Camry vehicles and 27,737 Venzas with models years 2009 through 2011. "During installation of the contact-type stop lamp switch on one of the North American assembly lines, silicon grease may have reached the inside of the switch and caused an increase in electrical resistance," Toyota said. "If this occurs, warning lamps on the instrument panel may be illuminated, the vehicle may not start, or the shift lever may not shift from the 'Park' position. In some cases, the vehicle stop lamps may become inoperative." Toyota said it was in the process of obtaining the necessary parts and would notify owners when they become available. Repairs will be conducted at no charge. [Ibid]

Toyota Fire Probe

In June 2012, the Wall Street Journal reported: “U.S. regulators expanded a probe of a power-window switch used in Toyota Motor Corp. vehicles that could cause them to catch fire. The U.S. government has added 600,000 Camrys and other vehicles made by Toyota to an investigation of fires in power-window switches. The investigation by the National Highway Traffic Safety Administration now covers some 1.4 million vehicles, compared with 800,000 at its initiation in February. [Source: Mike Ramsey, Wall Street Journal, June 20, 2012]

“NHTSA said it is focusing on the design of a power-window master switch used for the 2007-2009 model years. It was installed on those years' Toyota Camry, Camry Hybrid, RAV4 sport-utility vehicle, Yaris subcompact and on 2008 Highlander Hybrid vehicles. Safety regulators are doing an engineering analysis of the matter, according to NHTSA's website. It is a key step in determining the exact nature of a problem, and whether an auto maker has to issue a recall. A Toyota spokesman said the company is cooperating with NHTSA in its review. [Ibid]

“NHTSA has received 32 new complaints of electrical fires or smoke that appear to emanate from the driver-side door's window switch. The report includes one complaint of a burn injury suffered when a passenger in a 2007 Camry attempted to put out a fire that erupted in a door. A complaint filed with NHTSA on May 19 said a 2007 RAV4 ignited while parked and completely burned. [Ibid]

“The Toyota Camry has been the best-selling car in the U.S. for the past decade, topping 400,000 in deliveries in some years. Because of the large numbers of vehicles in circulation, any recall related to the vehicle could be costly for Toyota. [Ibid]

Toyota After the 2011 Earthquake and Tsunami

After the earthquake and tsunami in March 2011 Toyota had to suspend operation at some of its plants both because of earthquake damage and shortages of parts. It was forced to reduce production by about 140,000 vehicles in the two weeks after the disaster. The company also had to suspend operations at overseas plants because of parts shortages. Production in terms of domestic output fell by 63 percent in March 2011, when the earthquake and tsunami occurred. In the United States dealers ran out of some models. Shortages of the Prius were reported a few weeks after the disaster.

In January 2011 Toyota opened a new plant to make compact cars in Ohira, Miyagi Prefecture---its first new Japanese plant in 18 years--- only to have it shut down a few weeks later by the earthquake and tsunami in 2011. Miyagi Prefecture was hit hard by the disaster.

Within six weeks after the disaster Toyota had resumed domestic output at all 17 of its domestic plants. 18. But things were far from normal. The plants were closed for a long 12-day Golden Week holiday break in late April and early May and there were concerns the plants would close again or run at half capacity in June because of an inability to secure electronics parts.

Sales of Toyota vehicles fell behind GM and Ford after the earthquake and tsunami in 2011 in the United States as parts shortages and Toyota production cuts hurt sales. There was a big shortage of Priuses. Because most of them are made in Japan getting supplies to the cars to the United States after the earthquake and tsunami in 2011 was a problem. It wasn’t until later summer 2011 that supplies were able to meet up with demand.

In May 2011, the whole Tokyo Stock Market was lifted on the news that Toyota production was recover sooner than expected. By that time the disaster had cost Toyota the production of 550,000 vehicles in Japan and 350,000 overseas. Production reached 90 percent of pre-disaster levels in June and 100 percent in July. Initially Toyota was missing 150 kinds of parts. By May that number had been reduced to 30.

In June 2011, Around the same time Moody downgraded Toyota’s long-term rtaing from Aa3 to Aa2 over concerns that it will take some time for Toyota to return to string profitability due to various setbacks and increased competition in the auto market.

In September 2011, Tesla said it was ready to make electric vehicles at the NUMMI plant. In August, Toyota Motor Corp. and Ford Motor Co. reached a preliminary agreement to jointly develop a hybrid system for sport-utility vehicles and light trucks.

In September 2011, Toyota resumed full output in North America, ending the period in which production was slowed by a shortage of parts related to the earthquake and tsunami in March 2011. Around the same time the company said it would transfer production of the new Camry from Japan to the United States because of the high value of the yen.

Toyota said its hopes to raise global output to record 8.9 million in 2012. In August 2011, Toyota’s domestic output was up for the first time in a year. Exports also rebounded for the first time in six months.

Toyota to Merge Auto Units in Japan as Yen Strengthens

In July 2011, Bloomberg reported: “Toyota Motor Corp., grappling with a profit-sapping yen, said it will combine its car-making units in northern Japan to boost efficiency. Japan’s biggest automaker and subsidiaries Toyota Auto Body Co. and Kanto Auto Works Ltd. have agreed to convert the two units to wholly owned subsidiaries through share exchanges in January 2012, the automaker said in a statement. [Source: Makiko Kitamura and Masatsugu Horie, Bloomberg, July 13, 2011]

Toyota is pushing the merger to help maintain 3 million units of output in Japan. The carmaker said no jobs will be affected by the merging of its car-making units. The automaker will eventually scrap some antiquated factory lines, though the timing or how many will be shut is unclear at this point, a company representative said. “The merger is a necessary move,” said Satoru Takada, an analyst at TIW Inc. in Tokyo. “The yen is trading below 80 yen, yet Toyota has kept its domestic output ratio high compared to its Japanese competitors.”

Toyota is aiming to be profitable at an exchange rate of 80 yen to the dollar and prefers the 85 yen level as a manageable break-even point. When yen climbed to the upper 70s yen per dollar, Toyota President Akio Toyoda said, “The manufacturing situation is difficult in Japan. “We are clenching our teeth in trying to protect manufacturing in Japan.”

Around the same time Toyota said it would build an engine plant in tsunami-stricken Miyagi Prefecture beginning at the end of 2011.

Toyota, Nissan Pursuing Different Post-Tsunami Business Paths

August 2011, Kyodo reported: “As Japanese automakers recover from the devastation caused by the March earthquake and tsunami, two major players---Nissan and Toyota--- have adopted starkly contrasting post-disaster business strategies. Nissan aims to expand in emerging markets, while Toyota (TM) will focus on enhancing customer satisfaction with its products and services rather than setting any sales targets. [Source: Kyodo, August 17, 2011]

Toyota's motto now is to offer quality goods at low prices to make its customers feel Toyota's products are good bargains, a senior official said. "This sounds modest but Toyota has already built a global business network so it is more important for the company to hold on to its existing customers rather than initiating an aggressive marketing offensive," one industry analyst says. "That's the way to preserve the clout of the leading company."

The company vows to produce "even better cars that will exceed customers' expectations," as President Akio Toyoda puts it. Superior fuel efficiency and a touch of class will likely be the salient characteristics of its new cars, industry watchers say.

Observers say Toyota is trailing behind Nissan and Suzuki Motor Corp. in emerging markets, but company executives are giving little heed to such views as they prioritize the training of factory hands and sales personnel over the expansion of production or sales networks. Executive Vice President Yukitoshi Funo, who is in charge of overseas operations, is cautious about doing business in emerging markets on the grounds that they cannot expect to grow indefinitely. There could be "steep ups and downs" in those countries, he said.

The company will also go ahead with the restructuring of its group in hopes of beefing up its management prowess. Two subsidiaries -- Kanagawa Prefecture-based Kanto Auto Works Ltd., which builds small cars, and Toyota Auto Body Co., an Aichi Prefecture-based van producer -- are to be turned into wholly owned units in January.The company expects all these efforts will help boost its worldwide sales including those of its group firms Daihatsu Motor Co. and Hino Motors Ltd. to 10 million vehicles in 2015.

Toyota's 2011 New Car Sales in U.S. Fall Forth Year in Row

In January 2012, Kyodo reported: “Toyota Motor Corp. saw its new car sales in the United States fall 6.7 percent in 2011, down for the fourth straight year, but its U.S. rivals enjoyed double-digit growth as overall sales in the market increased for the second consecutive year, according to data released by a U.S. research firm. [Source: Kyodo, January 5, 2012]

“Toyota was forced to reduce production in North America for about six months until September due to parts shortages caused by the March disaster in Japan, cutting sales by about 400,000 units. Its sales in 2011 totaled 1,644,661 units, with its market share dropping to 12.9 percent from 2010's 15.2 percent, according to Autodata Corp. [Ibid]

“Overall new car sales in the United States increased 10.3 percent last year from 2010 to an estimated 12,778,171 units, Autodata said, adding the figure is preliminary as some European carmakers have yet to finalize their data. Among the "Big Three" U.S. automakers, General Motors Co. sold 2,503,797 units, up 13.2 percent, retaining the top position for the entire year with a market share of 19.6 percent. [Ibid]

March 11 Disaster, Strong Yen Cause Toyota to Slip to the World’s No. 3 Automaker

Hajime Yamagishi wrote in the Yomiuri Shimbun: “After four years as the world's leading automaker, Toyota Motor Corp.'s crown slipped in 2011 due to intensifying global competition and production cuts forced by the March 11 disaster. Although Toyota expects a rebound in sales in 2012, the road to regaining the top spot looks to be anything but smooth. [Source: Hajime Yamagishi, Yomiuri Shimbun, January 30, 2012]

“Toyota's worldwide sales, including sales of Daihatsu Motor Co. and Hino Motors Ltd., fell 5.6 percent from the previous year to 7.95 million units, placing it in third place behind General Motors Co. of the United States and Volkswagen AG of Germany. Toyota produced about 40 percent of its vehicles domestically, the highest among Japan's three largest carmakers--Toyota, Nissan Motor Co.and Honda Motor Co. As a result, Toyota's production was hit hardest by the March 11 disaster. The devastating earthquake and tsunami also hurt Toyota's overseas production, which was clipped by about 1 million units because the automaker uses many electronic parts manufactured in Japan. [Ibid]

“The Toyota group is primed to get back in the race for the world's top position. However, many economists say it is unclear whether Toyota will regain the top spot even if sales recover in line with the company's plan because GM and Volkswagen have solidified their footholds in China, South america and other emerging economies. "Toyota will stay No. 3 for the time being," said Takaki Nakanishi, an analyst at Merrill Lynch Japan Securities Co. [Ibid]

“Although Toyota is chasing the automakers up ahead, it should keep an eye on its rear-view mirror as well. South Korea's Hyundai Motor Co., which ranked fifth in global sales, also has emerged as a strong rival to Toyota. In addition to brisk exports spurred by the won's depreciation, Hyundai cars have won glowing reports for their quality and design compared with their Japanese and European counterparts. [Ibid]

Toyota Bounces Back After the March 2011 Earthquake and Tsunami

Toyota's global vehicle production has recovered to pre-tsunami levels in September 2011, Toyota said. AP reported: “Toyota initially said it didn't expect production to return to normal until late this year. It said in June that production would be nearly back to normal in July. In August, it said it would be completely recovered in September. The latest confirmation highlights Toyota's ability to bounce back. Toyota workers will be racking up overtime and doing extra shifts in coming months to make up for lost production from the disaster, the maker of the Prius hybrid and Camry sedan said. [Source: The Associated Press October 06, 2011]

“Nick Bunkley wrote in the New York Times: “For a car dealer, few things are more frustrating than watching would-be buyers walk away because the particular model they want is out of stock. That is how many who sell Toyotas, Hondas and some other Asian brands spent the summer after the devastating earthquake and tsunami that struck Japan in March caused widespread production disruptions at plants around the world. Seven months later, nearly all auto plants have resumed full operation, with most running overtime to compensate for the output they lost. But carmakers say it will take until early next year for their dealers to be fully restocked and sales back to normal. August was the first month since the disaster that Toyota and Honda dealerships received more cars and trucks than they sold, according to Edmunds Toyota said all of its plants were back to full operation as of September, two to three months ahead of its initial estimates. [Source: Nick Bunkley, New York Times, October 13, 2011]

“Still, getting vehicles from plants in Japan to American dealerships takes more than a month, and even models made at plants in the United States or Canada can spend several weeks in transit, depending on their destination.”We’ve got a ways to go,” said Mike Shum, the general manager of Toyota Sunnyvale, a large dealership in California whose sales and inventories have been cut in half since the earthquake. “I don’t have them all on the ground yet, but I can see them coming.” In late September, when Toyota introduced a redesigned version of the Camry midsize sedan, the Sunnyvale store had just eight of the cars in stock, including the outgoing model. Normally, it stocks about 150 Camrys.The dealership has lost at least 1,000 sales this year because of the supply shortages, Mr. Shum said. It was sold out of the Prius, a hybrid car made in Japan, for much of the summer, though truckloads have been arriving much more frequently in recent weeks. [Ibid]

“In a year when high gas prices and increased demand for fuel-efficient vehicles could have brought big gains for Toyota and Honda, their inability to keep dealerships adequately stocked made them the only major automakers whose sales declined in 2011. For Toyota and its dealers, the earthquake occurred just as they were hoping to regain some of the momentum lost during a series of big recalls in 2010. At Toyota Sunnyvale, Mr. Shum said he had to lay off 20 percent of his sales staff after sales started dropping, but since then he has been able to bring everyone back and is hiring additional employees. [Ibid]

“There’s that moment of truth when a consumer decides they’re ready to drive home in a car today, and if you don’t have the car, that deters a few of those buyers,” Mr. Shum said. “There’s probably a 10 to 15 percent run-off of people that we’ll never get back, but I think we can get a lot of those customers that have waited.” [Ibid]

Toyota is Hit by Flooding in Thailand and the High Yen as it Recovers from the 2011 Tsunami

Just as Toyota was recovering from the 2011 tsunami it is hit by flooding in Thailand. Floods in Thailand in the autumn of of 2011 resulted in a shortage of parts, in turn leading to production being suspended in the country. Toyota's Japanese factories also worked at reduced capacity until November. [Source: Admiral, November 7 2011]

“Production in Japan "will be adjusted based on an on-going assessment of the parts supply situation at each individual production line," Toyota said in a company statement. Toyota spokesman Amiko Tomita told the BBC that the suspension of production in Thailand will lead to a loss of 69,000 units between 10 October and 5 November. Japanese plants were projected to show a reduction of 22,000 units between 24 October and 5 November. [Ibid]

“In November 2011, Bloomberg reported: “Toyota Motor Corp. scraped its profit forecast after Thailand’s worst floods in almost 70 years hampered the company’s efforts to recover from the record earthquake in March. Carmakers “may try to shift away from Thailand, because we don’t really know what’s going to happen to Thailand in the rainy season next year,” said Yuuki Sakurai, president at Fukoku Capital Management in Tokyo. “By the time the problem is over, who knows, we may have another rainy season again.” [Source: Anna Mukai, Masatsugu Horie and Yuki Hagiwara, Bloomberg, November 08, 2011]

The Thai disaster has cost Toyota about 150,000 units of lost production from Oct. 10 to Nov. 12, according to the company. “There is only so much they can do to make up for the losses from the Thai floods as Toyota was producing at full capacity to make up for output lost to the Japan earthquake, said Koji Endo, an auto analyst at Advanced Research Japan who estimates that a three-month disruption may cut the automaker’s operating profit by 200 billion yen. [Ibid]

“The inundation has caused a shortage of components, leading output levels to drop to about 80 percent of capacity in Japan and 90 percent in North America, Takahiko Ijichi, a Toyota senior managing officer, said today in Nagoya. Still, Ijichi said the floods probably won’t delay the launch of new models and Toyota may be able to resume production as early as this month. [Ibid]

“For Japanese carmakers, the disruptions from the March earthquake led to a combined 18.5 percent drop in output in the fiscal first half, according to Japan Automobile Manufacturers Association. The Thai floods struck too soon for Toyota to apply the lessons learned from the disaster at home, according to the company.”After learning our lesson from the March earthquake, we actually had plans to build up on parts inventory,” Satoshi Ozawa, executive vice president of Toyota, said in Tokyo today. “The floods in Thailand came before we could do anything, and we are facing another round of production disruptions.” [Ibid]

Bloomberg also reported: “The company blamed the yen, which appreciated against all major currencies from July to September, for eroding 80 billion yen from operating profit last quarter. The yen climbed to a postwar high of 75.35 to the dollar on Oct. 31, leading the government to intervene in the foreign- exchange markets. The stronger yen, which erodes profit gains by reducing the repatriated value of overseas sales, has prompted Japanese companies to turn to the government for further measures to product domestic exporters. [Ibid]

“In June 2011, Jiji Press reported, shareholders of Toyota Motor Corp. approved a proposal to slash the salaries of the company's directors by 43 percent year-on-year for the fiscal year ended in March. Questions about the auto giant's plans to deal with the yen's appreciation and domestic production dominated the general shareholders' meeting, which was held in Toyota city. Executive Vice President Satoshi Ozawa said the automaker will streamline operations and increase productivity to cope with the yen's strength. [Source: Jiji Press, June 16, 2012]

Toyota Retakes Global Sales Lead from GM for First-Half of 2012

In July 2012, AP reported: “Toyota bounced back from safety recalls and natural disasters, selling 4.97 million vehicles globally in the first half of the year to retake its crown as the world's top automaker from General Motors Co. The Japanese company sold about 300,000 more cars and trucks than GM did in the first half of the year, a lead large enough that it will be difficult for GM to catch Toyota in the final six months of 2012. GM said it sold 4.67 million vehicles during the first half. [Source: Associated Press, July 26, 2012]

“For Toyota Motor Corp., the numbers underline a powerful rebound from a period of dismal sales, and the resilience of its brand as it gains traction in new markets such as China and Southeast Asia while clawing back lost market share in the U.S. Both companies have said in the past that they don't care about the global sales leadership and are focusing on making profits. But the crown is a matter of corporate pride for both automakers. [Ibid]

“GM doesn't plan to drop out of the race, though. The company's sales and market share grew in China, and Chevrolet, its largest brand, has seen record growth for seven straight quarters, spokesman Jim Cain said. GM sales should rise because 70 percent of its U.S. models will be refurbished or all-new in the next two years, said Cain. But the company's factories and sales recovered faster than expected, making it very hard for GM to catch Toyota between now and the end of the year, said Jeff Schuster, senior vice president of forecasting at the LMC Automotive consulting firm in Troy, Mich.Also, GM has a bigger presence than Toyota in Europe, where auto sales have fallen dramatically, and China, where the economy is starting to slow, Schuster said. [Ibid]

“Volkswagen AG was in third place in the global sales race. The company said earlier this month that it sold 4.45 million vehicles in the first half. It came in second after GM in global vehicle sales last year. GM had already trailed Toyota for the first quarter of this year at 2.28 million cars and trucks across the globe, while Toyota sold 2.49 million vehicles. Toyota has forecast that it will sell 9.58 million vehicles in 2012, up 21 percent from last year. GM has not given a full-year forecast. [Ibid]

“Chizuko Satsukawa, auto analyst for Standard & Poor's in Tokyo, said Toyota faces intense competition not only from GM and Volkswagen but from other automakers, including Hyundai of South Korea.Toyota is counting on its next surge of expansion in Southeast Asia, following other high-growth markets such as China, India and Brazil, she said. "Toyota's rebound is impressive," said Satsukawa. "But what's even more important than the numbers is profitability.” [Ibid]

“Satsukawa said Toyota was at a disadvantage because of a strong yen, compared with European and South Korean makers that have the perk of a weak currency that raises earnings from exported vehicles. That makes gaining sales numbers critical for Toyota, she said. Doing well in North America was also critical because that rich market is where many automakers, including Toyota, can hope to rake in hefty profits. [Ibid]

Toyota Plans Record 2012 Output

On an unconsolidated basis, Toyota aims to boost sales in 2012 by about 20 percent to 8.58 million units. Toyota expects government subsidies for purchases of eco-friendly cars and an increase in domestic demand--as well as the recovery of its production facilities and supply chains--will push up sales.

“In December 2011, AFP reported: “Toyota Motor plans to boost its global output to a record 8.65 million vehicles in 2012, boosted by demand in emerging markets, reports said. Toyota anticipates continued growth in emerging markets in Asia and South America although sales outlooks in developed nations are murky due to the European debt crisis, the Nikkei business daily said. [Source: Agence France-Presse, December 17, 2011]

In April 2012, Bloomber reported: “Toyota said it expects its sales in the U.S. market to grow 15.5 percent in 2012 from 2011 to some 1.90 million units, by boosting sales of its new Camry sedan launched last October and by introducing new hybrid and other environmentally friendly models. Toyota raised its forecast for 2012 industrywide U.S. sales of cars and light trucks, citing rising consumer confidence. It increased its forecast to the low- to mid-14 million range from 13.6 million. [Source: Bloomberg, April 5, 2012]

Image Sources: Toyota

Text Sources: New York Times, Washington Post, Los Angeles Times, Daily Yomiuri, Times of London, Japan National Tourist Organization (JNTO), National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

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© 2009 Jeffrey Hays

Last updated October 2012

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