Free Annual Reports
Toyota Adds To Auto Woes
Toyota Motors (NYSE:TM) is expected to announce its first annual loss when it reports for the end of its fiscal year on March 31. There has also been continuing news about production cuts and the ongoing sales slump. The Japanese automaker is expected to report a $1.7 billion loss for the fiscal year, and has projected ongoing difficulty in its business due to the global recession and the resulting global downturn in auto sales. Investors are looking at when the automaker's prospects might turn around.
IN PICTURES: How To Make Your First $1 Million
Auto Sales Gridlock
Drive by any auto dealership and you are almost certain to see the same image of car-filled lots, unsold inventory. While U.S. carmakers Ford Motor (NYSE:F) and General Motors (NYSE:GM) have been dealing with this problem, intermittently, for years, it's new territory for Toyota. Toyota's downturn follows eight straight years of record profits in which its strength in the U.S. market helped build and reinforce its strong global position. In contrast, Toyota's February production of vehicles was cut by nearly half, and its sales forecast for the 2010 fiscal year projects an 8% decline.
Trouble on the Home Front
In the U.S., Ford and GM have been publicly dealing with their own troubles. GM has had its stock pounded down to $3 a share, and in its ongoing weakened position has been seeking government assistance. GM is in the news daily with its struggles to meet obligations, and most recently, on March 30, Rick Wagoner stepped down as CEO and Chairman. Ford is in a somewhat healthier position, maintaining that it does not need government assistance, but it is hardly thriving in sales and earnings. (Internal return on investment helps determine a stock's ability to propel shareholder returns, learn more in Earnings Power Drives Stocks.)
Things are slightly better overseas, but similar enough to be discouraging. Japan's Honda Motor Corp. (NYSE:HMC) is poised to post losses. Honda's stock price is languishing, as it is also feeling the sales and production falloff. Daimler AG (NYSE:DAI) has not seen the precipitous drop-off like other automakers, but its business and profits have been slashed. Europe, Asia and the United States are all feeling economic pain and the automakers seem to be feeling it most.
Turnaround Horizon
With Toyota having just announced substantial sales and production cuts, it's clear that troubles in the industry still haven't bottomed out. While credit precipitated the economic recession, with the housing industry being the first victim, it took a bit of time to work its way through to the auto industry. While the U.S. carmakers and Congress struggle with a bailout or assistance plans, the overall economy is what most affects auto sales.
Consumers are facing mortgage and credit troubles and mounting job losses, and the auto industry is seeing lessening demand and over-capacity of production, and these things all add up to awful circumstances for Toyota and the other auto makers. Even with U.S. consumer revival occurring sometime down the road, the road is already filled with cars, which will keep demand low. (What people buy and where they shop can provide valuable information about the economy, see Using Consumer Spending As A Market Indicator.)
Don't Toy with the Stocks
Unless you are unfortunate enough to have had the automakers' stocks in a retirement account or mutual fund, most long-term investors are staying away from Toyota and the others. Deft traders, even day traders, may find the small shifts in the low-priced U.S. auto stocks attractive to buy and sell, but for long-term fundamentals, Toyota and the other automakers are not showing much promise at the moment. Ford and GM (GM especially) may have little equity value going forward, but Toyota should be able to rebound after another couple of slow, painful years. This is new for Toyota as a company, and a new experience for its potential investors. Toyota must re-establish its business success and its stock's value in the next couple of years before investors should consider investing long-term in this company.
IN PICTURES: How To Make Your First $1 Million
Auto Sales Gridlock
Drive by any auto dealership and you are almost certain to see the same image of car-filled lots, unsold inventory. While U.S. carmakers Ford Motor (NYSE:F) and General Motors (NYSE:GM) have been dealing with this problem, intermittently, for years, it's new territory for Toyota. Toyota's downturn follows eight straight years of record profits in which its strength in the U.S. market helped build and reinforce its strong global position. In contrast, Toyota's February production of vehicles was cut by nearly half, and its sales forecast for the 2010 fiscal year projects an 8% decline.
Trouble on the Home Front
In the U.S., Ford and GM have been publicly dealing with their own troubles. GM has had its stock pounded down to $3 a share, and in its ongoing weakened position has been seeking government assistance. GM is in the news daily with its struggles to meet obligations, and most recently, on March 30, Rick Wagoner stepped down as CEO and Chairman. Ford is in a somewhat healthier position, maintaining that it does not need government assistance, but it is hardly thriving in sales and earnings. (Internal return on investment helps determine a stock's ability to propel shareholder returns, learn more in Earnings Power Drives Stocks.)
Turnaround Horizon
With Toyota having just announced substantial sales and production cuts, it's clear that troubles in the industry still haven't bottomed out. While credit precipitated the economic recession, with the housing industry being the first victim, it took a bit of time to work its way through to the auto industry. While the U.S. carmakers and Congress struggle with a bailout or assistance plans, the overall economy is what most affects auto sales.
Consumers are facing mortgage and credit troubles and mounting job losses, and the auto industry is seeing lessening demand and over-capacity of production, and these things all add up to awful circumstances for Toyota and the other auto makers. Even with U.S. consumer revival occurring sometime down the road, the road is already filled with cars, which will keep demand low. (What people buy and where they shop can provide valuable information about the economy, see Using Consumer Spending As A Market Indicator.)
Don't Toy with the Stocks
Unless you are unfortunate enough to have had the automakers' stocks in a retirement account or mutual fund, most long-term investors are staying away from Toyota and the others. Deft traders, even day traders, may find the small shifts in the low-priced U.S. auto stocks attractive to buy and sell, but for long-term fundamentals, Toyota and the other automakers are not showing much promise at the moment. Ford and GM (GM especially) may have little equity value going forward, but Toyota should be able to rebound after another couple of slow, painful years. This is new for Toyota as a company, and a new experience for its potential investors. Toyota must re-establish its business success and its stock's value in the next couple of years before investors should consider investing long-term in this company.
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Free Annual Reports
