Toyota (TM): Another Sign Car Industry Is Recovering?

Toyota (TM) posted an $816 million loss in its last quarter, but lifted its forecasts. It will up production for its fiscal year which ends in March to 6.6 million vehicles from 6.5 million.

It is not clear that the news is good for the rest of the industry or whether Toyota’s drive to become a more efficient manufacturer which produces cars that will appeal to local markets will take share from competitors.

Toyota is the world’s largest car company, a title it recently seized from GM. The firm has made its bones on being a low-cost producer of highly reliable cars. It has also been a leader in fuel-efficient vehicles and hybrids.

The US auto market showed some improvement last month. A great deal of that was due to the “cash for clunkers” stimulus package put together by the federal government. It is not clear that the program will be renewed. A number of analysts have also predicted that the incentive system for turning in older cars is simply moving sales forward in the year and stealing from activity that would have occurred in the fall and winter anyway.

The expected improvement in Toyota’s fortunes may be based as much on an anticipated increase in market share as it is an overall recovery of the global vehicle market in 2009 and early 2010. GM is a much weaker company than it was two years ago, and so is Chrysler. Toyota may end of robbing them of some of their customers. At the same time, the industry may not improve at all.

A win for Toyota is not necessary a sign of a recovery in consumer spending.

Douglas A. McIntyre