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The Slowdown Strategy

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By Ian Rowley

The Slowdown Strategy


It’s a measure of how tough these times are for automakers that even the strongest are suffering. Through September, U.S. sales for Toyota, the world’s most profitable carmaker, are down 10%. In Japan (where Toyota’s market share is over 40%) and Europe, sales are also sluggish. Even fast-growing China, where the Japanese automaker aims to increase sales 40% this year, is expanding less quickly than previously hoped. Meanwhile, analysts reckon Toyota operating earnings could slump 40% during the current financial year—worse than the 30% fall Toyota projects.

Yet while the Big Three flirt with bankruptcy (BusinessWeek, 10/7/2008), Toyota’s solid balance, ample cash, and continued profitability—even if its earnings slump as projected, it will still make over $10 billion—are enabling the company to fund measures that many industry watchers reckon will help it emerge stronger from the current mayhem. In the short term that means steps such as offering 0% financing on certain vehicles in the U.S. That should help boost showroom traffic and tell customers Toyota has cash to finance vehicle purchases. Longer term, Toyota plans to introduce more hybrids and more attractive smaller cars.

Here’s a look at some of the measure’s Toyota is taking during the current downturn.

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