Toyota (TM): No Industry Recovery On The Horizon

Toyota (TM) says that the global automotive industry is facing two more lean years. It expects to lose more money this fiscal year than it did last and to run most of its factories at well below their capacity.

Toyota will survive another two years of hard time because of its balance sheet. The same may not be true or Ford (F), GM, and Chrysler, each of which may have to go to the federal government for assistance beyond what has already been given to Detroit.

The American auto companies have done a remarkable job of cutting costs and retooling balance sheets. They have given themselves the chance to make profits, even in a depressed car market. But, if the market remains at the historic lows where it is now, with domestic sales running at only 10 million vehicles a year, US companies may not be able to make money even with their much lower cost bases.

The government is still in the position where it cannot let the American car industry fail. There are too many jobs at stake and too much federal money already sunk into the industry.

Douglas A. McIntyre