Apparently, Japanese car-makers are concerned about being too profitable, when American car companies are experiencing difficulty. I wonder when strategy courses in business schools will start teaching management of political perception of “fairness to competitors”.
Source link: http://archive.mises.org/3520/toyota-were-too-profitable/
Toyota: We’re too profitable!
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I’m eager for Chinese at the low end, bankrupted and de-unionized North American and newly high quality Korean automakers to make Toyota pine for the days of being “too profitable.”
Is this reality?
But as a driver, who would ever buy and American car? they are completly unreliable, more expensive, and have less power/feautres! Maybe its not profitable to make cars in America anymore, maybe we have better things to use our labor and capital for?? LoL, i just bought a maxima about a year ago too, i love it!
It’s true – better for American car manufacturers to be forced to compete properly and produce decent cars. Still, I believe they have improved quite a bit?
There is the other issue about General Motors – its main business is financial and has little to do with the cars. I think it was Bill Bonner who said something along the lines of them effectively giving away cars as free gifts…
Mike Linksvayer is more right than he realizes. Toyota’s management is nothing if not focused on long-term strategy, in which they expect to have real competition come from automotive producers China, India, and other places around the world that may surprise you.
In effect, they realize that being “too profitable” now may cost them much more greatly in the future, as it may not be beneficial to establish an expectation of high profitability which would otherwise distract them from making sound strategic decisions on the automaker’s course.
In the immediate future, I think we can look forward to seeing more “partnering” between U.S automakers and Toyota, particularly in the area of producing hybrid gas-electric vehicles for the U.S. domestic market. Longer run, look for Toyota to take a small ownership stakes, or the equivalent thereof, in healthier U.S.-based car manufacturers.
I’m confused. The last line of the article was:
“Honda is best known for motor bikes, and the popular Honda Civic family saloon.”
Family saloon?
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I own a Hyundai Elantra. It was the best value. Extremely cheap, yet reliable and effective. Hyundai is far more of a threat to Toyota than any American car mfg.
As a consumer, I would prefer Toyota go all out so as to spur their competitors (in this case, American mfg’s) to greater quality. By being unwilling to “compete at 100%,” they are hurting us both.
Brian: Saloon is what the English call a sedan.
Had I owned Toyota shares I would have definitely sold them at this point. A company who is troubled by its own success and feels pity for its competitors has likely reached its peak.
Up until now, the secret of Toyota’s success has been “the Toyota way”, their practice of setting ambitious targets and when they reach these targets to set new even more ambituos targets. But this irrational worry about success perhaps means that this will be a thing of the past.
Although hopefully for Toyota, it could have just a gaffe.
The Japanese car companies have been about the only bright spot in the Japanese economy. Not just Toyota, but also every other Japanese car company except for Mitsubishi is reporting record sales and record profits, even while the Japanese economy has stagnated.
One of the reasons for this is that Toyota’s increasing sale has only to a minor extent meant higher exports of cars from Japan. The increased North American sales has mostly been met with increased production in North America. Since 1990, Toyota’s North American sales has nearly doubled from 1.17 million to 2.29 million in 2004, but imports of Toyotas has only increased from 790000 to 850000, while production in North America has increased from 380000 to 1.44 million.
The story is the same for Honda and Nissan, virtually all of its increased sales have been covered by increased production in the U.S. or Canada.
So Andy D. is wrong. There will be car production in America, only it will be in factories owned by Toyota, Honda and Nissan rather than GM and Ford.
This entire argument assumes a level playing field, and more specifically one that does not create waves. The DXY (US Dollar trade weighted index) was at 120 during the late ’90s, now it is in the mid-’80s. Interest rates were and are yo-yoing.
If you were running GM and/or Ford TODAY – you have to honor promises to existing retirees and workers – what would you do? Break the longstanding contracts?
And what happens when the USD moves another 40%? How do you build infrastructure (which takes years) to work in either a depression or a bubble, with a high USD or low USD, with 1% or 10% interest rates?
GM and F may not be managed well, but in the current environment it is hard to separate luck, Government folly or subsidy, and actual mistakes.
We sometimes forget Japan Inc. in their bubble of the late ’80s, to their “will never recover” funk of the ’90s.
Enron, Global Crossing, and Worldcom looked brilliant at the time.
After the next economic seismic shift, Toyota might be hurting.
Long ago I pointed out that the same problem that makes socialism untenable – the inability to calculate when price doesn’t transmit information – is present is a subtler but no less malignant form when currencies fluctuate (and interest rates) so all calculations acquire an error term. It is very tiny under a Gold standard. It can wipe out profits entirely or give a lottery like bonus with what is happening today.
Mises said socialists couldn’t calculate. Did he ever say it would be possible in places run by those who would play with currencies and interest rates?
I thought the BBC article said it pretty clearly–Toyota isn’t worried about being too profitable, they’re worried about seeming too profitable and facing political backlash. The sad part is that the U.S. probably is more concerned about helping American automakers (and/or “saving jobs”)than it is in letting American consumers get the best automotive deals. Remember the tariffs of the early 80′s, when Toyota switched from selling economy cars to luxury cars in the U.S.?
Ironman: What other places around the world that may surprise? Brazil? Eastern Europe? Haiti? Ok, that last would be surprising.
“Brian: Saloon is what the English call a sedan.”
Awww… they had gotten my hopes up, too.
I think they’re just worried about the political fall out because they know the days of the big three (or now big two) are numbered. The same goes with some European luxury car makers (yes, I dare say Mercedes and BMW). Their thinking is in the right place, because the last thing they need with a crummy dollar (especially Lexus and Infiniti) is for the US govt to slap a super tariff on car imports, which would hurt their further encroachment on US and European market share in the luxury car and truck business sectors.
However, Toyota and other makers should just push forward. They’re going to have Hyundai out of Korea and lord only knows who out of China to worry about in the coming decades in the low end car market at least.
I don’t know if I want a car made in America, my japanese nissan is of very high quality, and when I compare it to a tarus or a focus, im glad it was imported!
It is funny that overseas companies can be more profitable in our country than our own industries.
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