$127,000 a car? Now that's a margin

[Buick61]

Automotive News / November 13, 2006 - 1:00 am

How would you like to make $127,000 pure profit on every Camry, RAV4 or other Toyota you sold over your original forecast?

That's Toyota's prediction for the second six months of its fiscal year, which ends March 31.

Toyota raised its global sales forecast by 20,000 vehicles from its May prediction, to 8.47 million for the full fiscal year. It also jacked up its forecast for operating profits: to ¥2.20 trillion, or $18.66 billion, from $16.12 billion.

Do the math. Nice margins if you can get them, eh?

Higher volume isn't the whole story. It's barely a footnote.

The weak yen is the real driver behind the higher profits forecast. Toyota now says each dollar it gets on U.S. sales will bring it ¥115 in revenues, not the ¥110 it previously expected.



Link (Subscription needed, apologies)

[nadepalma]

Originally Posted by Buick61

The weak yen is the real driver behind the higher profits forecast. Toyota now says each dollar it gets on U.S. sales will bring it ¥115 in revenues, not the ¥110 it previously expected.

But is the weak Yen driven from market fluctuations or by manipulations by Japanese authorities?

I know that the Japanese dont' interfere the same way the Chinese do, but the Japanese government spends hundreds of billions of dollars a year to artificially decrease the value of the yen to keep their economy export driven and jobs at home.

Makes you wonder....

[tomcat_cool17]

When is the gov't and WTO going to step up and fix this dang cheap Yen that Japan and China is purposely keeping low? Once that happens the quality and exporting costs outweigh the cheap labor and low Yen.

[eb110americana]

Maybe I'm missing something somewhere, but how can you make $127,000 profit on something like a Camry that sells for more like $27,000? They say "do the math" so... $18.66 billion/8.47 million vehicles = $2203 profit per vehicle. That's no where near $127K.

Wait, I just figured it out. They are saying profit increase =
$18.66 billion - $16.12 billion = $2.54 billion
and if that is all attributed to the 20,000 additional vehicles they will sell then,
$2.54 billion/20,000 = $127,000 profit per additional vehicle.

Even they admit that things don't work that way. It's just a ploy to get more attention for the article. Journalists

[DuSpinnst]

Originally Posted by nadepalma

But is the weak Yen driven from market fluctuations or by manipulations by Japanese authorities?

I know that the Japanese dont' interfere the same way the Chinese do, but the Japanese government spends hundreds of billions of dollars a year to artificially decrease the value of the yen to keep their economy export driven and jobs at home.

Makes you wonder....

From what I understand the Yuan (China) is severly devalued, the Yen is slightly devalued, and even the Dollar is also a bit devalued.

The only "major" currencies not devalued, the Euro and Pound. Europeans are getting SCREWED right now. Their goods are EXPENSIVE to everyone.

[t-rex]

I'm no economist, but I'd assume that a country like Japan, which has to import ALL its raw materials, wouldn't devalue its currency too much. I'd guess that if it were devalued too much, the higher cost of oil, ore, and other materials would be detrimental to business growth. Darn maybe I should've paid more attention in that ECON 101 class twenty years ago.

[macphisto]

The yen is devalued against the dollar and it is intentional. The Japanese government tends to play with buying up US debt and that is enough to keep the currency depressed somewhat and give them an advantage in trade. It's not as bad as what the Chinese do. The yen is about 15% or so below where many think it should be.

Now the South Korean and Chinese currencies are very different stories. China has bought up a lot of debt which has severly devalued their currency.

If the Japanese currency were worth what it should be then it would seriously eat into Japanese corporate margins and would encourage them to build more products in China or in the US.

[63GrandSport001]

From the way Ive had it explained to me they buy US dollars/debt in large amounts to keep the US dollar in the 110-115 yen to Us dollar area. This gives Japanese automakers a huge edge in the US, if it was happening naturally then I wouldnt care but the Japanese Government is doing it so that isnt cool.

At the same rate the Us has a edge in Europe.

[DuSpinnst]

Originally Posted by t-rex

I'm no economist, but I'd assume that a country like Japan, which has to import ALL its raw materials, wouldn't devalue its currency too much. I'd guess that if it were devalued too much, the higher cost of oil, ore, and other materials would be detrimental to business growth. Darn maybe I should've paid more attention in that ECON 101 class twenty years ago.

Unless you buy the raw material from countries who have an even more devalued currency.

It is a question of balance.

Also the most expensive part of many manufactured goods is the "value added" part, which is mostly labor. Keep labor costs down (thru whatever method) and your product can sell for less, or sell for the same with higher profit.

[guitarlix]

From another forum. Don't know how true it is because I'm not an economist or finance major.

You know, vague charges of currency manipulation are always leveled against Japan, but I see no real evidence of it. The rate is currently about 117 yen / dollar. 6 years ago it was 116/$. As far as I recall, it hasn't fluctuated more than 10% in the last 10 years. I have seen greater fluctuation in the Canadian Dollar. The amount of fluctuation in the value of the yen has made zero difference in my travel plans, or my own business with Japan.

Over the long term (28 years), I have watched the yen go from as low as 230/$ (1978) to around 108/$ (c. 1994 - note that it is still within 10% of that historical high value). When it was strong, people were all up in arms about how it enabled the Japanese to buy up American assets like Rockefeller Center. When it's low, it's because they're trying to foist their cars on us. Here's a clue: AMERICAN CONSUMERS ARE BUYING JAPANESE CARS BECAUSE THEY LIKE THEM. JAPANESE CONSUMERS ARE NOT BUYING AMERICAN CARS BECAUSE THEY DONT LIKE THEM. It's got nothing nothing to do with "currency manipulation". And, as I've pointed out before, person for person, Japanese spend just about the same on imports from the U.S. as U.S. consumers do on imports from Japan. Actually, more as a percentage of GDP. Just not so many cars.

Please, just use your head for a second: Japan imports all of its basic resources: iron ore (in fact, all metals), oil, 95% of its coal, timber, most food grains except rice (and the globalist whiners are trying even to take that away from them). Most of these commodities are denominated in U.S.$ on the international market. Suppose they wanted to devalue their currency. This would immediately raise their costs for the materials that their industry depends on. Furthermore, currency is devalued by increasing the supply. The effect of an increased money supply and devalued currency would logically be inflation. In fact, Japan has been experiencing deflation for most of the period since the '97 Asian economic crisis. So where is the evidence of currency manipulation? Just because they're not picking up on the new Buick Lucerne in Tokyo, or the fact that your neighbor just bought a Camry means, ipso facto, that they must be manipulating the currency?

Lastly, our own Federal Reserve bank acts all the time to regulate the money supply (and hence, its value). The name "Greenspan" ring a bell (or Ben Bernanke)? Paul Volker? "Manipulating" the value of our currency was their job.

This whole Japanese currency manipulation thing is total bull. There are two types of people spouting it: liars with an agenda, and the grossly uninformed. Google "Japan currency manipulation" - you'll get mostly links to "levelfield.org" - in fact, every link I followed offered the imbalance in automotive trade as the sole evidence of currency manipulation. No mention of policy statements, or specific legislative or ministerial acts. Just "they're selling a lot of cars, so they must be manipulating the currency. In point of fact, one of the reasons for the yen not being higher at the moment is high levels of government debt (the same thing weakening the dollar) due to propping up and backing the bad debts of failing banks and corporations (so much for Japanese economic voraciousness). This debt makes Japanese assets and currency less attractive to investors and speculators, lowers their credit rating, and keeps the value of the yen in check.

Which is it? Currency manipulation, or brainwashing? The Japanese make good cars. Deal with it.

[NemesiSupra]

Which is it? Currency manipulation, or brainwashing? The Japanese make good cars. Deal with it.

This might be the casue of mass suicide on gmin, shame on the writer

[jbartley]

the yen is devalued so much artifically it's ridiculous

[CobaltSScrazy]

Originally Posted by nadepalma

But is the weak Yen driven from market fluctuations or by manipulations by Japanese authorities?

I know that the Japanese dont' interfere the same way the Chinese do, but the Japanese government spends hundreds of billions of dollars a year to artificially decrease the value of the yen to keep their economy export driven and jobs at home.

Makes you wonder....

yeah if we didn't have the OIL shackles like we do, what could have been if we had done that?

CobaltSScrazy

[markusername]

Being in Japan on business right now and reading what the regular GM'ers have to say it is no wonder to me that we are losing to Toyota. It would be nice if people at least pretended to be educated before posting opinions (for example on another thread some lunatic was ranting about Toyota copying Demmings works and giving him no credit - for your information if you had ever even been to Japan you would know that Toyota workers mention him in the same breath as they do their own company founder. They literally worship the man.)

Getting back to this topic - Japan (the central bank) buys a few hundred billion dollars in the currency market ever YEAR. Every DAY over $2 Trillion dollars is traded on the world currency market. The bank of Japan has NO power to effect the Yen by buying and selling in the open market. (This is different than China as China does not let their currency trade freely but in a 'band'). I do not defend China at all as they do not allow thier currency to float. Every year Japan buys billions of dollars of US government debt (which anyone even you as an individual can buy). What you see from Japan is not currency manipulation.

When Wagner and others keep bringing this up it's for the mass uneducated American public and not for the policy makers (like the Fed) who actually know the truth. It's for Joe Public so he feels bad for GM that Japan is using 'currency manipulation' and maybe will be goaded into buying a GM again instead of looking at the competition.

Next time get educated in how financial markets work. Don't forget - a mind is a terrible thing to waste.

[logansowner]

Originally Posted by jbartley

the yen is devalued so much artifically it's ridiculous

What I find amusing is that most of the people here havnt got a damn clue what goes on with the yen or anything else that isn't at home. THey hear someone else mention something and then make a post saying how much they knew about it.

Care to enlighten us with your knowledge of the yen? lol