Toyota: Winner And Still Champion

Toyota Motor (NYSE: TM) announced its earnings for the quarter that ended September 30, and they were impressive. The company damaged its reputation due to millions of recalls and the recent value of the yen also undermined results. But, the world’s largest car company said on a consolidated basis, net revenues for the first quarter totaled 4,871.8 billion yen, an increase of 27.0 percent compared to the same period in the last fiscal year. Operating income increased from a loss of 194.9 billion yen to 211.6 billion yen, while income before income taxes and equity in earnings of affiliated companies was 263.0 billion yen. Net income increased from a loss of 77.8 billion yen to a profit of 190.4 billion yen. Net income stated in dollars was $1.22 billion. By way of contrast, Ford Motor (NYSE: F) made $1.7 billion last quarter without the currency-related problems that Toyota has

Consolidated vehicle sales for the quarter were 1.82 million, an increase of 419,000 units compared to the same period last fiscal year. It is a remarkable performance in light of the quality issues that the company has faced since the beginning of 2010. The most impressive figure in the Toyota financial statement was the improvement in operating income in North America where sales have been hurt by the negative publicity over the recalls.

The earnings show that the damage to the Toyota brand has not been great enough to drive the company into financial trouble. It is also testimony to Toyota’s ability to keep operating costs low–a habit that served it well through the global recession.

Toyota faces challenges now from a resurgent GM and Ford, and global powerhouse VW. Toyota’s presence in China is not as strong as some of its rivals, and the company must do well in what has become the world’s largest car market.

Toyota’s recall problems seem to be largely behind it. Its brand power is nearly untarnished, and that means it may be able to recover its reputation as the leader in producing quality, affordable cars. The firm has turned a corner, the quarterly results seem to show and can move ahead aggressively again.

Douglas A. McIntyre