December 22nd, 2008
01:32 PM GMT
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TOKYO, Japan – As Toyota goes, so does Japan's economy. That's just one of the witty sayings you hear tossed around financial circles in Tokyo. That saying held quite a bit more grit than wit as Toyota announced that for the first time in its modern history, the automaker will post an operating loss for the fiscal year. Not just a small loss, but a major one totaling about $1.7 billion; a stunning turnaround for a company that one year ago posted record profits. In the words of Credit Suisse auto analyst Koji Endo, this is "the worst ever."

He didn't just mean for Toyota, but for the market overall. Toyota is Japan's winner, the one that always sets the standards and breaks the record books, the one company that others measure themselves against. So if Toyota is struggling, smaller and weaker companies around the world are faring even worse.

And as the largest automaker in Japan, Toyota's balance sheets tell the story of Japan's export-driven economy. Japan's government announced a trade deficit for the second month in a row. Global exports dropped by 26 percent and US exports plunged 33 percent. The domestic economy can't recover without global demand increasing, agree analysts.

So yes, the news is history-making and head-turning from Toyota. But it also paints a gloomy picture of how deep Japan's recession will be and how tough it will be to recover.

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soundoff (12 Responses)
  1. Girish Thakur

    In 1997 as part of my European MBA studies I was in the USA. During the week's course went for company visits, among others, to an SUV manufacturing plant of a US car manufacturer. The plant was then three years old, reconstructed with a new assembly line after natural disaster. At the end of the visit on my question to the plant manager – This must be a state-of-art plant? The plant manager answered “No” and suggested a visit the Toyota plant in the nearby state with a comment that it’s 15% more efficient than theirs.
    Over the years Toyota has worked further on efficiency and achieved number 1 position in the car manufacturing industry. The gloomy picture is not about Japan's recession but about world's recession.

    December 22, 2008 at 8:18 pm |
  2. Abhiram Modak

    This is the final nail in the coffin. One can blame US automakers for making Cars that don't sell and spending money they don't have. But Toyota is different. They are ultra cost and market cautious.
    May be things come a full circle every few decades.
    However US car makers should not take this opportunity to tell the US Law Makers and the World that "look we told you so". They were bad anyway and dying anyway. They should look at the fact that last year Toyota made record profit when these US Car makers were not terribly better than what they are today. It is like saying 'Smoking is not injurious to Health beacause some Smokers live for 90 years and some health people die at 60.'
    The lesson for you and me in these difficult times, as common people is that we must 'Spend Less while Trying to Earn More'. This however is not a guarantee against occurence of problems. This is a guarantee for being Capable of Finding Solutions.
    Toyota WILL be the first to come out of the red and NOT GM and Chrysler.

    December 23, 2008 at 7:28 am |
  3. ruwan

    Toyota is no exception. Low consumer spending will affect all exporters especially to exporters of high value items.

    December 23, 2008 at 10:02 am |
  4. Dr. arun Varma

    The western world propagated "excess-spend on credit" psychology has caused these woes. We are all now paying the price, including Toyota. Toyota will rebound by next year, but will the US auto industry? I doubt it, unless Obama goes for a surgical remedy.

    December 23, 2008 at 11:22 am |
  5. Sam

    Hang in there Toyota. My next car will not be American made. Time to do a big marketing push to get others of similar minds to buy your cars.

    December 23, 2008 at 1:29 pm |
  6. Gil

    You are perfectly right I repeat (Some corrections added)
    The economic word crisis which was caused by the economic engine of the world (U.S.A.) will not be solved until the issue of the mistrust in the US system is resolved. The problem of US economy is the extreme greed and corruption starting in the US Supreme court and judicial system and ending in Wall Street fraud.
    If this is not addressed, the crisis will bring us down until there will be no reason to deny the truth. See in the matter “The fixer” why US Judiciary is so corrupt” (Google books)

    December 23, 2008 at 1:34 pm |
  7. jemy

    world should focus more in agriculture , peace , reduce profit on loan , reducing prices of food ,,, then economical refreshment will come again .

    December 24, 2008 at 11:29 am |
  8. utkarsh, india

    It seems that we might have to increase our appetite for digesting the string of bad news that is coming in day after day.Being a global company toyota will certainly wean away from the american market if it does not recover fast enough to cover its positions. Certainly can't wait to see the toyota way work again to take some gloom off this murky environment.

    December 24, 2008 at 2:53 pm |
  9. jose barrera

    Toyota has benefited from the free market policies and now is pay time with the worst nightmare of the global market . Will the americans sacrifice Ford,GM,Chrysler for, foreign brands with better quality?

    December 26, 2008 at 5:19 am |
  10. Eze Henry

    the woes hitting the global market is very catastrophic, if am asked, i will say policy makers globally did their job wrongly. and i think its time to call for a turnaround, if not we all are in for a great trouble in the year to come.

    December 26, 2008 at 1:34 pm |
  11. Joe

    Why isn't anyone talking about the "poor management" at Toyota the way they have of the Detroit 3?

    December 26, 2008 at 6:04 pm |
  12. Nam(South Korea)

    Hi, Kyung.

    I think so.
    Most of the countries are in recession.

    But most analysts expect them to recover in 2009.
    I hope so.

    I'm a believer.

    December 26, 2008 at 9:38 pm |

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