Shock: Toyota Posts Massive Q1 Loss

In recent times, General Motors has always taken the honors of posting the worst financial results in the auto industry. Now they're get knocked off that throne by none other than Toyota, GM's arch nemesis. Knocked off yet another pedestal; they just can't catch a break can they? (That was a joke....)

$7.7 billion. That's Toyota's result for the January-March First Quarter. In just those few months, the company racked up those incredible losses. Yes, even more then the $6 billion reported by GM. How is that possible? Toyota was (and is) structured around the success and volume it has achieved. When things turned south, that changed dramatically. With such a small profit per vehicle, volume is a necessity and the flow is easily upset when things go bad.

Looking at the numbers, volume is down by huge percentages across the board and that's what is messing up the delicate balance.

Toyota clearly is in a much better position financially then General Motors though, no doubt. It has strong liquidity to help it weather this crisis, unlike GM which is at the end of it's cash reserves and relying on government funds. If they can't turn things around quickly though, I could see things getting a bit too close for comfort at Toyota HQ. It's amazing to think in any case though how it's possible that Toyota could post a larger loss then General Motors.

Toyota will be doing some cutting of it's own though to try to tamp down those losses.  They are postponing construction on their new Mississipi plant, working to reduce manufacturing costs, and laying of thousands of temporary workers around the globe. In addition they have offered workers buyout packages like GM and Ford have done with their workers.

I do think they will be under pressure for a while though, especially with the recent cuts to Prius pricing. I'm sure that will do some damage to the bottom line, given the complete lack of profitability on that model entirely. Any price cuts just further the per-unit loss. The other option though is to not cut the prices and watch volume decline, increasing losses as well. Either way not a good position to be in!

We'll see in the quarters ahead if Toyota's efforts to stop the bleeding meet any success.