The World's Top Automaker Recorded Its First Loss in 59 Years; More Red Ink Is Expected

Which automaker lost more money in the fourth quarter: hybrid-king Toyota or U.S. government ward General Motors? Astonishingly, it was Toyota, which also reported today its first annual loss in 59 years. Its quarterly loss was $7.7 billion, while GM's, reported on Thursday, was $6 billion. The Financial Times "Lex" column lamented this morning that Toyota's dismal financial report comes "just when the green shoots are appearing" in the global economy.

The report was especially grim because Toyota projected a $5.5 billion loss for the 2009-2010 fiscal year, during which it expects to sell one million fewer vehicles than it did in the year that ended on March 31, 2009. According to another FT article, "that outlook ran counter to a recent bout of investor optimism surrounding Toyota and other Japanese automakers, which some believe have put the worst of the global car industry crisis behind them. Share prices in the sector have risen 40% or more during the past month." But some analysts suggested Toyota may be overstating its loss projections to avoid downward corrections later on. "Toyota issued four profit warnings last year and lost the confidence of the market,” Koji Endo, an analyst at Credit Suisse, told the FT. “They absolutely do not want to revise down this year.”

Just last month, Toyota announced it was revamping its American operations (see Toyota Planning U.S. Tune-up?). At the time, Wharton management professor Lawrence G. Hrebiniak suggested that Toyota might use the sales decline as "cover" for addressing another problem: quality control in its U.S. plants. And, as Wharton management professor John Paul MacDuffie told Knowledge at Wharton earlier this year, "It is [no] surprise that Toyota is not immune to this global slowdown. Going from rapid growth to dramatic… shrinkage is a huge challenge" to the company.