Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

Previous Posts

Monday, September 18, 2006

Ford And GM: Toyota Goes For The Kill

Toyota announced over the weekend that it would boost oversea production by 40% by 2008 according to an Associated Press quoting the Japan daily Nihon Keizai. That would take Toyota’s annual output outside Japan to 5 million units.

Target: The US car market. Of the increase in unit production, almost two million of the new production is for Ford and GM’s home market.

Toyota’s share of the US car market runs about even with Ford’s at just below 18%.
Through April, Ford had lost market share for 25 consecutive months, while Toyota’s share was up. Toyota’s year-over-year sales by month were up 24 of the last 25 months for the same period, according to Bloomberg.

Toyota’s financial resources dwarf those of both GM and Ford, making the company’s new assault on the home market of the “Big Two” all the more plausible.

Toyota has a market capitalization of $172 billion. That is roughly .94 times the company’s annual sales GM’s market cap is $18 billion which is .09 times sales. Ford lags with a market cap of $15 billion, also about .09 times sales. Investors are clearly betting that Toyota’s future sales and profit results will be a better than GM and Ford by a huge factor. Equally important as an engine for growth is the profitability of Toyota. While GM and Ford has been losing money, in Toyota’s last fiscal year, the company had $16 billion in operating profits on revenue of $179.1 billion.

Toyota’s line of vehicles is not only more fuel efficient, but in surveys like JD Power, the company’s cars are more defect-free that those from GM and Ford. To make matters worse, Toyota will begin stepped up production of new Toyota Tundra, a full-sized truck aimed at the largest pick-ups in the US market, especially the Ford flagships the F-series trucks.

If Detroit does not have enough problems, Toyota plans to add to the pile.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

Powered by Blogger