Toyota Tumbles: Slow Reaction Hammers Auto Giant


The fact Toyota posted it's first annual loss in 75 years is not surprising- almost every auto maker lost money this year. The fact this company lost $6.9 Billion in the quarter ending this March is staggering, but not so out of line that people are shocked. What is surprising is Toyota CEO Katsuaki Watanabe telling reporters in Tokyo his company was "lacking in the scope and speed of dealing with various issues."

Watanabe's candor reflects how hard the global slowdown in sales has hammered Toyota. With its two biggest markets (Japan and United States) both reeling, Toyota sales have plunged. That said, the Japanese auto maker is feeling pressure around the world. Even in China.

So how could Toyota have been slow in responding to the dramatic drop in sales?

Part of the problem is Toyota's size now limits how quickly it can react. As it's grown into the #1 auto maker in the world, Toyota has become less nimble. It's now so large, and so globally inter-connected that hitting the brakes is far tougher than in the past. Another issue is that Toyota has made some strategic calls that have back-fired. The most prominent one being opening the Tundra pick-up plant in Texas right before trucks sales tumbled. These are not horrific gaffes that will destroy the company. But after decades of making the right call time after time, that type of misstep is magnified.

Does this mean Toyota is on the verge of sliding into years of financial losses and retrenchment as we've seen with GM? No. This is still a company with incredible resources and a global business plan that should succeed. In Europe, Toyota is making the right moves. Here in the U.S., it's positioned to rebound with the economy. Japan and China remain challenging, but I believe Toyota will not only weather the current slump, but ultimately emerge stronger.

All of this re-enforces why the results for last year are so surprising for so many people. This is a company that can and should rebound. The challenge for incoming CEO Akio Toyoda is to get the global giant back on track.

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