Toyota may lose top spot as profits down 77%

GM and VW set to overtake Toyota as net profits at the world's biggest carmaker collapse due to disaster related production difficulties.

by Andrew Saunders
Last Updated: 27 May 2011
Toyota’s net profit for the three months to March plummeted to 25.5bn Yen (£192.7m), from 112.2bn Yen for the same period last year as production losses caused by March’s earthquake and tsunami hit hard. As expected, the firm has also suspended its forecast for the rest of the year as it struggles to get back on track after this latest and greatest setback.

It’s often said that the true test of mettle, whether organisational or personal, is how we respond to adversity and disaster. And no-one can say that Toyota has not had its fair share of both in recent years. First came a series of safety-related recalls which threatened to seriously damage the marque’s hard-earned reputation for quality and reliability.

Then just when it looked like it had safely negotiated those treacherous bumps in the road, on 11th Mach Japan was struck by the double whammy of the nation’s largest earthquake in modern times and the subsequent tsunami.  Production at all but three of Toyota’s Japanese sites was halted completely for a month - equivalent to a loss of 260,000 cars. Satellite factories across the globe were also hit by a shortage of vital components, including the site at Burnaston in Derbyshire where production is expected to be running 12,600 cars behind by the end of this month.  

Just to rub salt into the wound, its arch rivals GM of America and Germany’s VW/Audi have both been doing rather nicely, thank you, in recent months. GM’s Q1 operating profit tripled to $3.2bn earlier this month (admittedly helped by the sale of a couple of subsidiaries), whilst VW Audi posted its highest-ever quarterly sales figures, shifting 2m vehicles in the first three months of the year.

Consequently it’s highly likely that Toyota will slip to second or even third - behind both GM and VW - in the global car making league table. But there is some good news in amongst all the bad for Toyota and its boss Akio Toyoda. For starters, the firm is getting back on top of production more quickly than expected, with 70% of pre-quake levels set to be achieved by June. And for the full year to March 2011 income almost doubled, indicating that recovery was well under way before the disaster struck.

But with full production not set to be re-instated much before the end of the year, 2011 still looks like it's going to be a hard one for Toyota, and for the Japanese economy in general. But here at MT we can’t think of another firm - or country - more likely to come through it all with flying colours.  

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events

Subscribe

Get your essential reading delivered. Subscribe to Management Today