almost 4 years ago • 2 mins
As Toyota tries to make it across this coronavirus-ravaged landscape in one piece, the carmaker warned investors on Tuesday that its profit will fall by as much as 80% 📉
The Japanese company reckons it’ll sell 15% fewer vehicles this year – an even bigger drop than after the 2008 financial crisis. And since carmakers have high fixed costs, profits get hit hard even if sales slow just a little.
Still, at least Toyota made a forecast at all: plenty of rivals – from General Motors to Honda – declined to in the face of COVID confusion. Better yet, thanks to the $74 billion cash stockpile it’s accumulated, the company has an enviable cushion if the economy gets even worse. And it may need that: some analysts are expecting global vehicle sales to slide by a third, compared to the 11% drop after the last crisis 🚗
Falling car sales like those Toyota’s experiencing will be having consequences further down the supply chain too. Just look at tiremaker Bridgestone, which announced a 65% drop in quarterly profit on Tuesday. Things could be worse, mind you: they could be in the coronavirus-hammered car rental business like Hertz, which this week outlined dramatic measures in a bid to avoid bankruptcy 😓 Too right it hurts…
Companies like Toyota don’t just make cars nowadays: most also have financing arms that lend money to prospective buyers. These segments can be left on the hook if customers stop paying them back, which is why Toyota set aside nearly $500 million to cover those losses in the first quarter of 2020 💰 With Americans already falling behind on their auto loan payments before COVID hit – and a record 20 million Americans losing their jobs in April – more losses from loans seem inevitable.
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