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Toyota Motor (TM)Stock (Transportation Industry, Auto Makers Industry, Manufacturing Industry, Luxury Industry)
 Japanese auto manufacturer Toyota (NYSE:TM) is currently one of the most successful companies in the auto industry. It sold over 8.5 million vehicles worldwide in 2007 and led the industry in operating profit. Although the company posted income growth of 4.5% for the financial year ending in March of 2008, Toyota forecasts its profits will decline by about 30% for the next year. This downturn is largely a result of slowdowns in the economies and car markets in the United States, Japan, and Western Europe. Toyota's sales are concentrated in Japan and North America, but has seen rapid growth in Asia and South America. The company has a reputation for quality and gas efficiency in all of its offerings, from the low-end Scion and Yaris lines to stalwart Corolla and even luxury Lexus, and it has had unusual success with product pitches, accurately predicting (and in some cases, driving) consumption patterns towards the trendy and the fuel-efficient. But the company stands out most for its high production efficiency: Toyota's low production costs and relatively affordable price points drive exceptional profits. Toyota currently has a near choke-hold on the US hybrid/low-emissions vehicles market. The redesigned Prius has launched into cultural-icon status, leaving its previous eco-hippy image to enter the mass market in force in the form of taxis, government sponsored shared cars, and private vehicles. As the American Big Three struggle to meet the 35 mpg mandate by 2020, Toyota should be coasting. Toyota is now also trying to enter the SUV/truck market, traditionally the domain of the US Big Three. Recently Toyota unveiled the Tundra line of pickup trucks in the US, and it is opening two new plants dedicated to their production in Indiana and Texas. However, despite the durable reputation of Toyota Trucks, this expansion has been unsuccessful as U.S. gasoline prices have reached record highs and American consumers spurn larger vehicles. And the strong sales from Toyota's smaller vehicles such as the Prius and Corolla have been insufficient to offset slower truck sales, resulting in a lower sales volume in the U.S. for 2008. Toyota's worldwide sales continue to grow on demand from emerging markets. Like many Asian automakers, Toyota faces three principal risks: rising oil prices, rising steel and aluminum prices, and exchange rate fluctuations. Rising oil prices raise the cost of car ownership and drive down sales. Rising steel and aluminum prices raise the cost of car production and reduce profitability. And when the yen appreciates, Toyota earns less per vehicle sold in North America, leading to diminishing levels of profitability. Throughout the second half of 2008, Toyota appears to be besieged by all three of these challenges. 
[edit] BusinessIn 2007, Toyota earned 1.72 trillion yen (about $16 billion) on sales of 9.37 million vehicles. Business is divided into three main divisions:
Although Toyota has expanded rapidly for the past decade, sales are actually expected to decline in 2008, mainly on weakness in Toyota's main markets of Japan and the US. Despite this, the company is moving aggressively into the expanding Eastern European, Chinese, South American, and Middle Eastern auto markets, which are expected to continue growing rapidly. During the 4th fiscal quarter ending on March 31st, 2008, Toyota reported a decrease in income of 28% on a 3.8% increase in revenue, over the same time period in 2006. Operating income became more equally balanced among the regions during the quarter, with significantly higher contributions from growing markets, specifically emerging and resource-rich countries[1]. Higher fuel prices continue to make Toyota's reliable, fuel-efficient product line ever more appealing, allowing the firm to steal market share from the Big Three American car manufacturers, however, a depressed U.S. auto market has not prevented overall decline in company sales hitting Truck sales especially hard. Toyota realized unparalleled growth in South America and Asia in the quarter ending December 31st, 2007, especially in Thailand and Indonesia where production capacity has been increased to meet demand. In addition to significant revenue increases, operating income more than double in the South America/Africa/Oceania and Asia regions [2]. Strong Lexus sales in China have been a major stimulus of growth, while earnings increased modestly in saturated and aging Japan. [edit] The Toyota WayThe essence behind Toyota’s success is The Toyota Way and its Customer First Philosophy… Toyota has established a common set of values, beliefs, principles and business methods that guide and drive the business and act as the lifeblood of the company; collectively they are called as ‘The Toyota Way’. The Toyota Way is based on two Pillars, Respect for People and Continuous Improvement. Respect for people consists, Team Work and Respect for Others. Continuous Improvements has three building blocks, Kaizen, Genchi Gembutsu which means Go & See and Challenge. This is a fourteen-point overall company philosophy that emphasizes strategic thinking, accountability, and efficiency, "The Toyota Way" is intended to empower workers to take responsibility for the cars they make, and to think with quality in mind. While emphasizing abstract goals like long-run thinking and loyalty to the company, "The Toyota Way" also tries to minimize waste of personnel and production capacity. Perhaps the philosophy is successful--while General Motors, Volkswagen, and Ford all earn more revenue per vehicle than Toyota, their average costs per vehicle are also significantly higher--almost $24,500 to Toyota's bare $21,000. One important corollary of the Toyota Way is Just-in-Time production, a system that promotes the efficient factory operation that contributes to Toyota's low costs. Just-in-Time tries to produce cars just as they are ready to be sold, matching parts to orders and inventory to sales. This reduces financial costs on both ends: parts can be ordered right when needed, and cars sold at the same time. Just-in-Time production also lowers storage costs and reduces product write-off from unsold cars. And since cars are produced only a few at a time, product defects can be spotted before much damage is done. Since 2003, Toyota's inventory selling days have hovered around 35-40, indicating that Toyota cars are selling significantly faster than rest of the industry (industry standard: 60 days). [edit] Product Lines Toyota's follows a pyramid strategy, selling large numbers of low-cost models (Corolla, Camry) and smaller numbers of higher-cost models (Tacoma pickup truck, Lexus luxury vehicles). In 2006, Toyota sold almost double the number of Camrys and Corollas as it did Lexus and Tacomas. This product breakdown reflects Toyota's strategy of segmenting the market into wealth levels and selling accordingly. Below are a few Toyota cars of particular note:
With high gas prices and a weak US economy in the summer of 2008, Toyota reported a double-digit decline in sales for the month of June, similar to figures reported by the Detroit Big Three. For Toyota, these were attributed mainly to slow sales of its Tundra pickup, as well as shortages of its fuel-efficient vehicles such as the Prius, Corolla and Yaris. In response, the company has announced plans to idle its truck plants, while shifting production at other facilities to manufacture in-demand vehicles.[6][7][8][9] [edit] Company overviewImage:TOYOTA i-unit.jpg Concept i-unit Image:Toyotaconceptgfdl.jpg Concept PM In the 1990s Toyota began to branch out from producing mostly compact cars by adding many larger and more luxurious vehicles to its lineup, including a full sized pickup, the T100 (and later the Toyota Tundra), several lines of SUVs, a sport version of the Camry, known as the Camry Solara, and the Scion brand, a group of several affordable, yet sporty, automobiles targeted specifically to young adults. Toyota also began production of the world's best selling hybrid car, the Toyota Prius, in 1997. With a major presence with Europe, due to the success of Toyota Team Europe, the corporation decided to set up TMME, Toyota Motor Europe Marketing & Engineering, to help market vehicles in the continent. Two years later, Toyota set up a base in the United Kingdom, TMUK, as the company's cars had become very popular among British drivers. Bases in Indiana, Virginia and Tianjin were also set up. In 1999, the company decided to list itself on the New York and London Stock Exchange. Image:Toyota-Corolla-S.jpg With over 30 million sold, the Toyota Corolla is one of the best selling cars in the world. In 2001, Toyota's Toyo Trust and Banking merged to form the UFJ, United Financials of Japan, which was accused of corruption by the Japan's government for making bad loans to alleged Yakuza crime syndicates with executives accused of blocking Financial Service Agency inspections.[10] The UFJ was listed among Fortune Magazine's largest money-losing corporations in the world, with Toyota's chairman serving as a director.[11] At the time, the UFJ was one of the largest shareholders of Toyota. As a result of Japan's banking crisis, the UFJ was merged again to become Mitsubishi UFJ Financial Group. In 2002, Toyota managed to enter a Formula One works team and establish joint ventures with French motoring companies Citroën and Peugeot, a year after Toyota started producing cars in France. On December 7, 2004, a U.S. press release was issued stating that Toyota would be offering Sirius Satellite Radios. However, as late as Jan. 27, 2007, Sirius Satellite Radio and XM Satellite radio kits were not available for Toyota factory radios.[citation needed] While the press release enumerated nine models, only limited availability existed at the dealer level in the U.S. As of 2008, all Toyota and Scion models have either standard or available XM radio kits. Major Lexus dealerships have been offering satellite radio kits for Lexus vehicles since 2005, in addition to factory-equipped satellite radio models. In 2007, Toyota released an update of its full size truck, the Toyota Tundra, produced in two American factories, one in Texas and one in Indiana. "Motor Trend" named the Tundra "Truck of the Year," and the 2007 Toyota Camry "Car of the Year" for 2007. It also began the construction of two new factories, one to build the Toyota Rav4 in Woodstock, Ontario and the other to build the Toyota Highlander in Blue Springs, Mississippi. The company has also found recent success with its smaller models - the Corolla and Yaris - as gas prices have risen rapidly in the last few years. [edit] Toyota philosophyImage:IReal mg 2187.jpg iReal concept chair Toyota's management philosophy has evolved from the company's origins and has been reflected in the terms "Lean Manufacturing" and Just In Time Production, which it was instrumental in developing.[12] The Toyota Way has four components: 1) Long-term thinking as a basis for management decisions, 2) a process for problem-solving, 3) adding value to the organization by developing its people, and 4) recognizing that continuously solving root problems drives organizational learning[13]. The Toyota Way incorporates the Toyota Production System. [edit] The Toyota Production SystemToyota has long been recognized as an industry leader in manufacturing and production. The principles, described in Toyota's management philosophy, The Toyota Way, are as follows:
[edit] OperationsImage:Toyota Group Pavilion.jpg Toyota Pavilion at the Expo in Aichi Toyota has grown to a large multinational corporation from where it started and expanded to different worldwide markets and countries by becoming the largest seller of cars in the beginning of 2007, the most profitable automaker ($11 billion in 2006) along with increasing sales in, among other countries, the United States. Toyota Financial Services sells financing and participates in other lines of business. Toyota brands include Scion and Lexus and the corporation is part of the Toyota Group. Toyota also owns majority stakes in Daihatsu, and 8.7% of Fuji Heavy Industries, which manufactures Subaru vehicles. They also acquired 5.9% of Isuzu Motors Ltd. on November 7, 2006 and will be introducing Isuzu diesel technology into their products. Toyota has introduced new technologies including one of the first mass-produced hybrid gas-electric vehicles, of which it says it has sold 1 million globally (2007-06-07) [14], Advanced Parking Guidance System (automatic parking), a four-speed electronically controlled automatic with buttons for power and economy shifting, and an eight-speed automatic transmission. Toyota, and Toyota-produced Lexus and Scion automobiles, consistently rank near the top in certain quality and reliability surveys, primarily J.D. Power and Consumer Reports.[15] In 2005, Toyota, combined with its half-owned subsidiary Daihatsu Motor Company, produced 8.54 million vehicles, about 500,000 fewer than the number produced by GM that year. Toyota has a large market share in the United States, but a small market share in Europe. Its also sells vehicles in Africa and is a market leader in Australia. Due to its Daihatsu subsidiary it has significant market shares in several fast-growing Southeast Asian countries.[16] In the Fortune Global 500, Toyota Motor is the 6th largest company in the world. Since the recession of 2001, it has gained market share in the United States. Toyota's market share struggles in Europe where its Lexus brand has three tenths of one percent market share, compared to nearly two percent market share as the U.S. luxury segment leader. [edit] Worldwide presenceToyota has factories all over the world, manufacturing or assembling vehicles for local markets, including the Corolla. Toyota has manufacturing or assembly plants in Japan, Australia, India, Canada, Indonesia, Poland, South Africa, Turkey, the United Kingdom, the United States, France, Brazil, Portugal, and more recently Pakistan, Argentina, Czech Republic, Mexico, Malaysia, Thailand, China, Vietnam, Venezuela, the Philippines, and Russia. In 2002, Toyota initiated the "Innovative International Multi-purpose vehicle" project (IMV) to optimize global manufacturing and supply systems for pickup trucks and multipurpose vehicles, and to satisfy market demand in more than 140 countries worldwide. IMV called for diesel engines to be made in Thailand, gasoline engines in Indonesia and manual transmissions in the Philippines, for supply to the countries charged with vehicle production. For vehicle assembly, Toyota would use plants in Thailand, Indonesia, Argentina and South Africa. These four main IMV production and export bases supply Asia, Europe, Africa, Oceania, Latin America and the Middle East with three IMV vehicles: The Toyota Hilux (Vigo), the Toyota Fortuner, and the Toyota Innova.[17] Toyota has invested considerably into cleaner-burning vehicles such as the Toyota Prius, based on technology such as the Hybrid Synergy Drive. In 2002, Toyota successfully road-tested a new version of the RAV4 which ran on a Hydrogen fuel cell. Scientific American called the company its Business Brainwave of the Year in 2003 for commercializing an affordable hybrid car. [edit] Toyota North AmericaTemplate:Unreferenced-section Template:Main Image:Toyota Camry LE.jpg The Toyota Camry is assembled in several facilities around the world including Australia, China (PRC and ROC), Japan, Malaysia, Philippines, Russia, Thailand, and the United States. Toyota Motor North America headquarters is located in New York City and operates at a holding company level in North America. Its manufacturing headquarters is located in Hebron, Kentucky, and is known as Toyota Motor Engineering and Manufacturing North America, or TEMA. Toyota has a large presence in the United States with five major assembly plants in Huntsville, Alabama; Georgetown, Kentucky; Princeton, Indiana; San Antonio, Texas; Buffalo, West Virginia; and a new one being built in Blue Springs, Mississippi. Toyota also has a joint-venture operation with General Motors at New United Motor Manufacturing Inc. (NUMMI), in Fremont, California, which began in 1984, and with Subaru at Subaru of Indiana Automotive, Inc. (SIA), in Lafayette, Indiana, which started in 2006. Production on a new manufacturing plant in Tupelo, Mississippi is scheduled for completion in 2010. North America is a major automobile market for Toyota. In these assembly plants, the Toyota Camry and the 2007 Toyota Tundra are manufactured, among others. Toyota marketing, sales, and distribution in the U.S. are conducted through a separate subsidiary, Toyota Motor Sales, U.S.A., Inc. Toyota uses a number of slogans in its American TV commercials such as It's time to move forward, Smart way to keep moving forward, or Moving forward. It has started producing larger trucks, such as the new Toyota Tundra, to go after the large truck market in the United States. Toyota is also pushing hybrid vehicles in the US such as the Toyota Prius, Toyota Camry Hybrid, Highlander Hybrid, and various Lexus products. Toyota has sold more hybrid vehicles in the country than any other manufacturer. Toyota is a public corporation and the company's shares are traded on the Tokyo Stock Exchange, New York Stock Exchange and the London Stock Exchange. Toyota also sponsors Chivas de Guadalajara. [edit] United States employees and investmentsToyota directly employed around 34,675 people in the United States, invested USD $15.5 billion, produced 1.2 million vehicles using US and foreign auto parts, sold 2.54 million vehicles, and donated USD $340 million to nonprofits. [18] It has in total 10 plants, USD $2.9 billion per year payroll, purchased USD $28 billion in parts and supplies from 30 states. It created around 386,000 jobs in the United States as result of Toyota's spending and demand from suppliers. [edit] Hybrid technologyImage:Toyota Prius side.jpg Toyota Prius, flagship of Toyota's hybrid technology Toyota is the largest seller of hybrid vehicles in the world and the first to commercially mass-produce and sell such vehicles, the best example being the Toyota Prius. While hybrid technology began with the Prius, the company eventually began providing this option on the main smaller cars such as Camry and later with certain Lexus vehicles. It labeled such technology in Toyota cars as "Hybrid Synergy Drive" and in Lexus versions as "Lexus Hybrid Drive." It is important to note that while most automakers lose money on the sale of every hybrid, Toyota actually makes money on every Prius sale due to its high production volume.[19] The Prius has become the top selling hybrid car in America. Toyota, as a brand, now has three hybrid vehicles in its lineup: the Prius, Highlander, and Camry. The popular minivan Toyota Sienna is scheduled to join the hybrid lineup by 2010, and by 2020 Toyota plans to offer its entire lineup of cars, trucks, and SUVs with a Hybrid Synergy Drive option.[20] The Hybrid Synergy drive is the most widely rolled-out environment-friendly system in the automotive industry to date. More than 1,000,000 units have been sold. Toyota's CEO has committed to making every car of Toyota a hybrid vehicle eventually (though all hybrid versions may not be sold in the U.S.).[21][22] Image:LS 600h L Ritz-Carlton1.jpg Lexus LS 600h L hybrid sedan. [edit] Plug-in hybridsTemplate:Main After General Motors announced it would produce the Chevrolet Volt plug-in hybrid, Toyota announced that it, too, would make one.[23] Toyota is currently testing its "Toyota Plug-in HV" in Japan, the United States, and Europe. Like GM's Volt, it uses a lithium-ion battery pack. The PHEV (plug-in hybrid electric vehicle) could have a lower environmental impact than existing hybrids.[24][25] On June 5, 2008, A123Systems announced that its Hymotion plug-in hybrid conversion kits for the Toyota Prius would be installed by six dealers, including four Toyota dealerships: Westboro Toyota in Boston, Fitzgerald Toyota in Washington, Toyota of Hollywood in Los Angeles, and the Minneapolis-based Denny Hecker Automotive Group, which sells multiple brands.[26] [edit] ChinaToyota's sales have been growing 10% annually, but that pace cannot continue in the saturated European, Japanese, and American markets, where many already have cars and GDP growth is slow. China's economy as a whole has grown at 10% per annum since the early 1990s, and auto sales have been growing at a 20% rate. These growth rates are unsustainable; the latter implies a doubling every 3.5 years. Toyota counts China as part of its Asia sales network, which includes also Thailand and Taiwan. Overall sales in Asia grew by 5.7% from 2005 to 2006, to 880,000 vehicles. Production grew by 29%--a lot--to 836,000. The majority of the production growth occurred in China, with a new plant opening in Guangzhou that can produce 100,000 Camrys yearly. Toyota is also opening its first research-and-development center in China next year. Based near Shanghai, and is expected to build more R&D sites in Tianjin (China’s third largest urban area near Beijing) and Guangzhou (China’s third-largest metropolitan area about 75 miles north of Hong Kong). In early 2008, Toyota announced it would spend $214.6 million to boost production capacity at a facility in Tianjin by 50% to 150,000 vehicles a year. [edit] Toyota TrucksImage:2007-Toyota-Tundra-DoubleCab.jpg 2007 Toyota Tundra Double Cab The Toyota Tundra is a full-size pickup truck sold by Toyota that originally went into production in 1999 (as a 2000 model year model), Currently, the Tundra has been on the market for more than half a decade, and has captured 17 percent of the full-size half-ton market. The all new Tundra is assembled in two different locations, both inside the United States. The Standard and Double Cabs are assembled in "Truck Country" San Antonio, Texas, while the Crew Max are assembled in Gibson County, Indiana. Toyota Motor Corporation assembled around 150,000 Standard and Double Cabs, and only 70,000 Crew Max's in 2007. [edit] Non-automotive activities[edit] AerospaceToyota is a minority share holder in Mitsubishi Aircraft Corporation, having invested US$67.2 million in the new venture which will produce the Mitsubishi Regional Jet, slated for first deliveries in 2013.[27] Toyota has also studied participation in the general aviation market, and contracted with Scaled Composites to produce a proof-of-concept aircraft, the Toyota TAA-1 in 2002.[28] [edit] RoboticsToyota has been developing multitask robots destined for elderly care, manufacturing, and entertainment. [edit] FinanceToyota Financial Services Corporation provides financing to Toyota customers. [edit] Agricultural biotechnologyToyota invests in several small start-up businesses and partnerships in biotechnology, including:
[edit] Manufacturing facilitiesTemplate:Main Toyota has several manufacturing facilities in 28 countries. [edit] Financial informationToyota is publicly traded on the Tokyo, Osaka, Nagoya, Fukuoka, and Sapporo exchanges under company code Template:Tyo. In addition, Toyoto is foreign-listed on the New York Stock Exchange under Template:Nyse and on the London Stock Exchange under Template:Lse. Toyota has been publicly traded in Japan since 1949 and internationally since 1999.[29] Toyota reports on its consolidated financial statements 540 consolidated subsidiaries and 226 affiliates.
[edit] Accounting Ratios
[edit] Geographical MarketsToyota sells cars throughout the world, but its principal markets are Japan and the United States. Although in 2006 Toyota sold fewer cars in Asia--excluding Japan--than it did in Europe, the region remains strategically important because of its high growth potential. China's economy has far outpaced the world's, growing at an annual rate of 10% since the early 1990s. Its automotive sector has grown twice as fast.  [edit] Capacity and GrowthToyota's revenue has increased by 43% between 2002 and 2006; between 2005 and 2006, it grew by 13%. Whether Toyota can keep growing at this rate depends on how it manages its investments and capacity, and on whether the global economy keeps growing. In 2006 Toyota sold 7.97 million vehicles, but produced only 7.71 million, so some of its growth is from excess inventory. However, Toyota has new plants coming into operation throughout the world: the Indiana and Texas plants for Tundra production are just coming online, and a new plant opening in Canada will produce 200,000 vehicles annually. In 2010, Toyota planned to open an SUV plant in Mississippi, however due to decreased demand for SUVs in the U.S. Toyota announced that the opening of this facility would be delayed. This facility is expected to produce 150,000 vehicles a year. In China, Toyota has opened five new plants since 2005. Despite all the U.S. capacity, Japan produces 46% of all vehicles sold in the States. [edit] Brands, Profits, IncentivesToyota has strong brand recognition, particularly with the Prius and Lexus. Brand recognition allows Toyota to charge higher prices than its competitors and thus earn higher profits. This is particularly important as the leading U.S. auto companies—Ford and General Motors—have been struggling with sales and, consequently, are offering impressive incentives (low financing, reduced prices, etc.). Incentives spending in the United States averaged $2,670 in per vehicle in February, 2006, but for Toyota it was an average of $1,200 per vehicle ($1,600 for the Lexus, and just $100 for the Scion). [edit] Trends and Forces[edit] Japan
[edit] U.S.Several major trends in the United States economy bear upon Toyota's business:
[edit] Global
In an attempt to offset these increasing commodity prices, Toyota announced plans to raise prices on the FJ Cruiser, the Yaris, and the Prius, three of its most popular models. [edit] Exchange ratesAs a Japanese company, Toyota's profits are recorded in Japanese yen, but its sales are denominated in euros, dollars, pounds, Chinese yuan, and many other currencies. Fluctuations in the exchange rate between these currencies and the yen can lead to fluctuations in Toyota's profits; these fluctuations can be very large. Had the dollar-yen exchange rate been 1% lower last year (say 118.5 instead of 120), Toyota's profits would have fallen by 5 billion yen ($42 million). Toyota hedges its exchange rate risk by arranging currency swaps and purchasing futures, but these operations are costly and threaten to cut into the bottom line. In the long run, these effects are even more exacerbated: as the dollar depreciates against the yen, American sales are worth less to Toyota, and Toyotas are more expensive to consumers, so they buy fewer. Thus profit per revenue and absolute revenue both fall from depreciating exchange rates. While Toyota can hedge out the risk to its profit margins, it cannot easily manage the risk from falling demand. Exchange rates have become a sensitive subject among US legislators, who allege that Japan has kept the yen undervalued to stimulate sales.[2] [edit] Competition  In the first quarter of 2007, Toyota passed General Motors as the largest automaker in the world with total sales of 2.35 million vehicles as opposed to GM's 2.26 million. For all of 2007, however, GM maintained its No. 1 position, holding Toyota off by about 3,000 vehicles by reporting worldwide sales of 9,369,524 cars and trucks, up 3% from a year earlier. Toyota’s U.S. market share hit a record high 17.4% in April, which means May’s sales totals could put Toyota within two or three percentage points of GM in its home market. Strong growth in Latin America, Asia Pacific and Eastern Europe offset diminishing market share in North America. Unlike Toyota, however, General Motors (GM) posted an adjusted net loss in 2007.
[edit] Operational ComparisonThe following table compares Toyota to three other leading auto makers.
Notes: From company reports. Revenue and profit reported in billions of Dollars. Volkswagen revenue and profits reported assuming a Dollar-Euro exchange rate of 0.745. In 2006, Toyota is the second largest manufacturer by revenue and vehicles sold, but the largest by operating profit (and operating margin). The first two columns hint at the explanation for Toyota's high margins: it sold more cars than it produced, unlike Ford. Of course, Volkswagen and General Motors also sold more than they produced, without the high profit margins. Volkswagen and General Motors' profit is driven by (relatively) high revenue per unit: $24,600, and $22,700, respectively. Toyota's profit, on the other hand are driven by low costs per unit: $20,950, compared to $24,140 for Volkswagen, for example. General Motors and Ford are performing badly because they need to generate large revenue streams to pay off pension plans. Due to poor pension management and the falling stock market at the beginning of this decade, GM and Ford relied on high sales to pay their retired employees; consequently they have focused on revenue rather than profit, and the results show it. Ford and GM also both have to pay for their employees' health insurance, unlike Volkswagen and Toyota, which principally employ labor in states with nationalized health care. Toyota's advantage over Volkswagen stems from its lower cost, which is in turn due to the efficient production system and the Toyota Way philosophy. In addition to these traditional competitors, Toyota faces a number of regional car companies in developing markets, such as Russia, China, or Indian, that it seeks to penetrate. The problem is that Toyota's cars are often too expensive for these developing markets, while companies like Tata Motors (TTM) produce considerably cheaper cars that are affordable to a wider phase of the populace. [edit] References
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