Toyota Motor Corporation ADRTM

Morningstar Rating

Stock Research and Analysis

by David Whiston, CPA, CFE

A weak dollar and plummeting global demand for light vehicles have created a very difficult environment for Toyota. Although earnings will suffer this fiscal year, the world's largest automaker is one of the best positioned in the industry.

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Bulls Say

According to Automotive News, in calendar 2008 Toyota was the second-largest automaker in China.

Its popular vehicles allow Toyota to use fewer incentives than the Detroit Big Three, boosting the firm's profits and improving the resale value of vehicles.

Significantly lower pension and retiree health-care costs give Toyota a cost advantage over the Detroit Big Three, although this advantage is less than it used to be.

Toyota's manufacturing process is the envy and gold standard of the auto industry.

The more the Detroit automakers struggle, the better position Toyota is in to keep gaining market share in the U.S. Read more

Bears Say

Environmental laws are becoming stricter, which will make cars more expensive to produce and more expensive for consumers to buy.

The weak dollar will make increasing profits harder for Toyota than in the past and is forcing Japanese automakers to raise prices in the U.S.

The auto industry suffers from global overcapacity that creates pricing pressure and makes it difficult to earn high economic profits for all participants.

Detroit firms could soon have labor cost parity with transplant automakers in the U.S.

Recent Toyota quality problems in the U.S. may give Detroit rivals a chance to reclaim share in this critical market. Read more

Strategy

Following a loss in fiscal 2009, Toyota is moving back to basics. New leadership at the top and in North America will likely seek a return to quality and value over market share growth. With vehicles Read more

Management

Toyota has a management structure that differs from most public U.S. corporations. A board consisting of 29 directors and about 50 nonboard managing officers run the company. Former president Katsuaki Watanabe became vice chairman in June 2009 and Akio Read more

Profile

Founded in 1937, Toyota Motor Corporation has grown to become the world's largest automaker. Its brands include Toyota, Lexus, Scion, and Hino, and market share in Japan Read more

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