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Wednesday, October 04, 2006

Toyota Moves Back Toward Peak (TM)(GM)(F)(DCX)

Toyota's sales in the US for the month of September were up 25%. It sold nearly as many vehicles as Ford. The three US auto companies had sales that were close to flat, so Toyota once again picked up share.

Toyota's shares traded just above $70 in July 2005. After peaking at $124 in ealy May, they dropped below $100 on news of recalls and quality issues. But, the shares are on the move again at $111. The shares moved from below $110 to $111.25 in intraday trading yesterday.

With the company on the march in the US, but sales are soft in Japan. Sales of new cars and trucks dropped 7.4% in September, which was the 15th month of decline in Toyota's home market. Toyota's sales fell only 6.7%, a small victory.

Leaving the Japanes market aside. Toyota is growing in the US, Germany, and China. The company now faces the problem that it may be its own worst enemy. To satisfy demand, the company must ramp production around the world at a breath-taking rate. Recall problems have already plagued the company in the US, and the trend may continue at Toyota scambles to make more vehicles in a very short time-frame.

If the quality issues cannot be resolves, Toyota may not run much higher.

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

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