Talk of a “Toyota Bailout Loan” is Ridiculous and Absurd
Many of the people that hate Toyota are buzzing right now because these supposedly reputable news organizations (and others) are running misleading and inflammatory headlines like these:
- Toyota, Honda, Mazda May Ask for Government Bailout – US News and World Report
- Auto Bailout: Et Tu, Toyota? – BusinessWeek
- Japan’s Troubled Toyota Seeks Loan – Al Jazeera
All of these headlines have two things in common:
- They all make it seem like Toyota is in trouble and needs a bailout – just like the “not-so-big three.”
- They’re all false and completely misleading.
All of these headlines seek to paint Toyota as a company in trouble – a company that NEEDS money to survive…sort of like two of the three US domestic automakers. Puh-leaze. Whatever drugs these reporters are taking, they need to cut the dosage.
How about we compare the financial situation of Toyota to GM and Chrysler (companies who need money to survive) and Ford (a strong company, but still losing buckets full of cash)? Take a look at publicly available financial statements.
First, let’s look at Toyota. As of February, 2009:
Assets: 77.23 billion
Liabilities: 67.76 billion
Cash on hand: 11.47 billion
Net change in cash flow: 1.11 billion per quarter
That’s right doomsayers – Toyota improved their cash position by about 1.11 billion dollars last quarter, despite the huge drop in sales. Does that sound like a company in trouble?
How about GM? As of November, 2008:
Assets: 50.1 billion
Liabilities: 69.01 billion
Cash on hand: 15.83 billion
Net change in cash flow: -8.81 billion per quarter
WOW! Not only is GM insolvent, but they’re losing almost $3 billion in cash a month and they’ve only got $15.83 billion on hand. It’s important to note these numbers are three months old – the situation has only gotten worse since then. Guess that’s why they needed an immediate influx of cash in January to stay alive…
Since Chrysler is privately held, they’re not obligated to report these figures. Still, all the industry experts seem to agree that GM and Chrysler are in a similar situation. They NEED money – bad.
What about Ford? As of November 2008:
Assets: 162.26 billion
Liabilities: 83.29 billion
Cash on hand: 24.89 billion
Net change in cash flow: -10.39 billion
Ford is OK. Not only do they have quite a bit of cash on hand, but they also have nearly $80 billion in assets they can borrow against to come up with more cash if needed. Still, they’re burning through more than $3 billion in cash a month. That’s about $3.3 billion less than Toyota is making…per month.
Perhaps NOW people will understand why comparing the financial situation of Toyota to Ford, GM, or Chrysler is completely and totally ridiculous.
It’s kind of like comparing the finances of a broke college student living on student loans to the finances of a successful millionaire. Dumb.
What about the loan that Toyota is requesting then – why are they asking for money if they don’t need it?
Because the Japanese government is offering $5 billion in special low-interest loans to their top exporters (read this balanced news report from the Wall Street Journal).
You can call the loan a gift from the Japanese goverment if you want to, or you can call it a corrupt government handout, or you can even call it corporate greed if you want to. Just don’t call it a bailout – it’s nothing of the kind.
Filed Under: Auto News