After A Tough Year, Toyota Struggles To Mend

May 11, 2011

Sonari Glinton

Toyota, which has been suffering from ongoing parts shortages and production delays following the March earthquake and tsunami, announced Wednesday that its most recent quarterly profit fell by more than 75 percent.

The automaker has had a lot of problems lately, and they aren't just tied to the disasters in Japan.

Aaron Bragman, an analyst with IHS Automotive, says the company has a long list of troubles.

"Such as the appreciation of the yen," he says. "Such as people not buying Toyotas at the same rate globally that they used to...such as an older product lineup that hasn't been refreshed as fast as [those of] some of their competitors."

The yen is gaining value against U.S. dollar and other currencies. As a result, Bragman says, "vehicles that are manufactured in Japan are not nearly as profitable when they're sold in the U.S. as they used to be."

That puts Toyota at a disadvantage. It makes nearly 40 percent of its vehicles in Japan while its Japanese rivals, such as Honda and Nissan, produce only about 25 percent there.

So the yen problem — and even the production delays because of the earthquake and tsunami — have hit Toyota harder.

Then there's the problem of global sales.

"They may have increased sales in Asia, non-Japan Asia, like China," Bragman says. "But they're still not selling anywhere near the rates that a lot of their competitors like General Motors and Volkswagen are selling. There's issues between China and Japan politically."

And foreign markets are crucial for Toyota.

Possible Solutions

So what can the automaker do to dig itself out of hole?

Jim Wiseman, who works for Toyota North America, says a rebound for the company will boil down to persistence.

"What we try to do is just focus on 'OK, the Toyota way is to look at where problems exist, fix them, keep trying to get better. And we're all over it."

Wiseman points out that while recently thing have been bad for the company, over the last 12 months Toyota was profitable — and sold more cars.

That's despite everything.

"We had several challenges over the past few years," Wiseman says. "First with the downturn in the economy a couple years back; then the recalls that we went through last year. But overall, I think, those of us at Toyota are very optimistic about what's happening going forward."

A Difficult Legacy To Shake

"Lots of times a stumble by another automaker gives another advantage," says Michelle Krebs, who works with the car website Edmunds.com.

She says Toyota is still struggling to live down the damage caused by what happened with last year's recalls.

"What that did was planted in the mind of the consumer that this isn't the absolute bulletproof quality that people had been led to believe," she says. "So it caused people to look around. It became OK to buy a Hyundai Sonata instead of a Toyota Camry — and that has stuck."

Analysts say the real question is whether Toyota has lost the momentum it has been building on for the last 20 or 30 years.

If so, can it get back its mojo? Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.