Toyota’s Earnings Surge and Brand Power

After a three-year period in which Toyota (NYSE: TM) recalled more than eight million cars worldwide for problems that included faulty accelerators, as well as natural disasters in Japan and Thailand that badly damaged its production, the huge car manufacturer said profits would rise threefold in the current fiscal year. The power of Toyota’s brand allowed it to survive, and eventually prosper, after the lean years.

Toyota said profits in the first quarter of 2012 were up four times what they were last year to $1.5 billion. Profits for the entire year are expected to be $9.5 billion. The figures stand out, in part, because the recession in Europe and a slowing of automobile sales in China have undermined profit growth at several of the world’s largest car manufacturers. Recent earnings reports by General Motors (NYSE: GM) and Ford (NYSE: F) confirmed the extent of those problems.

The last survey of global brand value by BrandZ, one of the leading analysts of the subject, puts Toyota ahead of all other auto manufacturers in the world. At $24.2 billion, it ranked ahead of companies such as BMW, Mercedes and Honda (NYSE: HMC). A similar study by Interbrand also put Toyota at the head of all global car companies.

Toyota also has maintained its reputation for quality in the United States, ranking at or near the top of quality surveys conducted by research firms such JD Power. Toyota’s market share in the U.S. rose to 15% in April from 13.8% in the same month a year ago. And consumers had a wide set of alternatives among competitors because of a rise in the production of new models from formerly bankrupt GM and Chrysler, and an increased demand for recently successful Volkswagen and Hyundai.

Part of the reason for Toyota’s sales improvement is pent-up demand for some of its products, particularly the Prius hybrid, the best-selling car in its class worldwide. But, if Toyota had lost its reputation, that demand and the market for many of its other vehicles would have disappeared.

Brand value is more than a number of a piece of paper put out by a research firm.

Douglas A. McIntyre