TM - Toyota Motors - 2007/08/16 03:00
Toyota is a very good company and their performance in the weak auto market is very promising. They have good efficiency numbers and I believe their growing popularity in the US will be good for business. Toyota would give our the portfolio exposure in an area that we are lacking.
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short_seller
Re:TM - Toyota Motors - 2007/08/16 18:36
I like Toyota for several reasons. 1.) Okay cars, 2.) Just built a plant to manufacture the full sized tundra in the USA, and lastly 3.) a Rep. gave me a hat at the auto show!
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KrisJonA
Re:TM - Toyota Motors - 2007/08/17 04:50
Toyota appears to have dropped very significantly in 07. They no longer have the title of top sales globally anymore. GM is comparable, and maybe a better bargain if you want to stick to a large vehicle manufacturer. Toyota seems to react strongly to global currency changes as GM doesn't appear to do so. A report on GM may in my future because the more i look at it the more i like it. Im not saying Toyota sucks, but its steady at best, the IBM of car stocks.
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j.g.mussey
Re:TM - Toyota Motors - 2007/08/17 17:23
That is a good point with the what effect various moves in currency prices could have on TM (and GM). So would a declining dollar hurt or help TM compared to other car companies? Because of how international the auto industry is, which company produces more cars in the U.S.? If the dollar weakens vs. the Yen, will that hurt or help TM? Toyota trades in Yen in reality because it trades on the U.S. market via ADR's, but produces many cars in the U.S., meaning that is benefits from a low USD and would also be helped by a stronger Yen (Anyone, if I am wrong here please correct me, this is all hypothetical). What % of their cars are made in the U.S. that sell here? How does that work with other major nations that buy Toyota? Could a high % of cars sold in the U.S. that are produced here help them be less at the mercy of international exchange rates? Do they produce cars in the major nations in which they sell them? With increasing energy prices, it costs more to ship goods, and so because of that it may become more beneficial to produce cars in the nation in which they sell, do you feel that is true? I know its alot, but it's important we look at some of these angles.
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admin
Re:TM - Toyota Motors - 2007/08/17 17:47
I can help in explaining the effects of currency on the prices of imported goods to the US.
To get a better understanding, we have to look at currencies in pairs so if we are comparing Toyota and GM, we would use the currency pair USD/JPY (US Dollar vs. Japanese Yen).
In a market where the USD depreciates versus the JPY, such that we have had over the past couple weeks, the cost of Japanese goods in the United States would go up in comparable terms. This would help US car companies and hurt Japanese companies, because the Japanese cars would cost more per dollar.
Example: Japanese car fixed manufacturing costs: 1,000,000 Yen USD/JPY FX Rate #1: 150 Yen/Dollar USD/JPY FX Rate #2 (Depreciating Yen): 200 Yen/Dollar
Cost to US Consumer FX Rate #1: $6,666.66 Cost to US Consumer FX Rate #2: $5,000.00
From this example you can see how a depreciating Yen actually help Japanese car companies compete against US Car companies.
In a market where the JPY depreciates versus the USD, the cost of Japanese goods in the United States would decline in comparable terms. This scenario would help Japan car companies, because one USD would be able to buy more JPY, thus Japanese cars would cost less to Americans.
The last scenario is that the two currencies stay roughly equal. In this case, the Japanese car companies would benefit, because the Yen is historically undervalued and kept that way to ensure that the export-driven economy of Japan can stay competitive. Plus they have more control over their costs because there are less restrictive contracts and unions in Japan.
Conclusion
I would feel safer holding a Japanese car company over a domestic one at this time, because they have greater cost savings and the fact that they have a monetary policy that encourages exporting. The problem we may run into is if the Japanese Yen appreciates rapidly, then we could run into problems where domestic car manufacturers would be a better bet. However, I am still on the fence with the automotive industry and I am having a hard time convincing myself that this is an industry that the portfolio should be invested in at this time.
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j.g.mussey
Re:TM - Toyota Motors - 2007/08/17 18:46
Bryan,
I understand how the weakening of the USD vs. JPY could hurt TM if they produced only in Japan, but if TM produces cars in the U.S., they're spending U.S. dollars to do that. So if the dollar depreciates against the Yen, it might not have that profound an impact on Toyota sales of the vehicles because many are produced in the U.S. right?
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