Sparks are no longer flying on Japanese assembly lines as the Great Recession deepens.
While there are no indications Toyota Motor Corporation might need the same sort of desperation-driven financial bailout sought by its arch-rival General Motors Corporation, the situation is certainly getting more critical for the Japanese company, which, only last year, became the best-selling automotive manufacturer in the world. The same crisis is also affecting Honda Motor Corporation and Nissan Motor Company. All three of these Japanese giants are shrinking from startling production cuts of 40-50% in February.
The problem is that the automotive world is getting smaller in every market the Japanese Big Three compete in. If the latest projection by the Japanese Automobile Manufacturers Association holds true, that country’s new vehicle sales will hit a 32-year-low when data is tallied up at the end of the current fiscal year, which wraps up on March 31st. For the fiscal year, Japanese sales are off a seemingly modest 8%, but that market has never really recovered from the slump it entered, more than a decade ago, and annual sales are expected to hit just 4.3 million, about half of Japan’s one-time peak.
For decades, Japanese makers like Toyota have shifted focus to export markets, such as North America, but the global slump is taking a steadily worsening toll. For Japan, as a whole, its manufacturers – of everything from clothing to cars to computers – saw exports plunge by half last month.
Coincidentally, Toyota slowed production by 49.6% in February, a figure covering its core Toyota brand, as well as high-line Lexus models, Hino trucks and Daihatsu mini cars. Some of the biggest cutbacks occurred in Japan, where Toyota production sank 56.4% in February. But the automaker is curbing output everywhere, including the United States, where it has seen monthly sales numbers tumble by as much as 40% since the recession worsened sharply, in the latter half of 2008.
And the numbers don’t even reflect Toyota’s decision to put on hold operations at a new factory in Tupelo, Mississippi. Originally designed to build Highlander SUVs, Toyota announced last year it would switch production to the Prius hybrid. But, at this point, the factory is sitting half-complete, with no firm date for putting it into operation. That’s a $300 million slab of concrete sitting idle.
The downturn has clearly slammed the automaker, which has traditionally been seen as the cash-richest of the mainstream makers. But Toyota is expecting to lose around $5 billion for the current fiscal year that ends in March. And it has even applied for a $2 billion assistance package from a Japanese government-backed industrial bank. Could more requests for aid from all Japanese makers be on the way?