Talk of a “Toyota Bailout Loan” is Ridiculous and Absurd

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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:

All of these headlines have two things in common:

  1. They all make it seem like Toyota is in trouble and needs a bailout – just like the “not-so-big three.”
  2. 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

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  1. Jeremy The Greedy says:

    The reporters need to INCREASE their drug dosage. They are idiots.

    And that’s the way the cookie crumbles.

  2. Justin says:

    Hmm, so it’s okay for the Japanese government to give these automakers $$$, but it’s bad for the US to do the same for the domestics? Can we say double standard? I agree and understand the imports aren’t in the same situation as the domestics, yet. But for people to say one is okay and allowable while the other is not, is pure hypocrisy. These funds are to help each corporation in the manner the loans were written up. The US gave GM & Chrysler loans, Japan is giving out loans to its automakers, it’s simple as that, to help their manufacturers. I’m sure we could call these loans a bailout, cause Toyota and Honda and the like are asking the government for loans. If they were as well off as everyone thinks or says, then why must they ask the gov. for money? Why? If Toyota is in such a better financial situation than Ford, why must Toy ask Japan for a loan? Ford hasn’t taken any money from the US, yet, and they’re in a worse situation. Toyota is asking for assistance, just like GM & Chrysler have from the US government. So you can call it what you like, but truth is it’s a loan from the government just like the domestics received. In that sense, there really is no difference.
    *****
    Sorry if I repeated myself multiple times.

  3. Mickey says:

    Justin I didn’t read where Toyota has taken anything. So where you get double standards? From what I read Nissan, and Honda took the money and it didn’t say Toyota took any money. Ford may not have taken the money yet but they want it there when they need it. What do you call that? We will hold your 2 billion on the side for when you need it.

  4. Jeremy The Greedy says:

    Let me put this into simple terms. Japan giving money from their people to Toyota, I don’t care, just as long as Toyota keeps making a good product. Anyone giving my tax dollars to idiots who will not grow up and COMPETE in the global market, Bad. Status Quo gotta go. If we like it or not, we are in a global economy now with a global market. If the “Big three” want to do a top down revamp to be global, I would not have an issue with them getting some money to help. They help our economy so I am not stupid. The colapse of the American Auto industry would be devastating. The issue is that if they are not changing totally to become the front runner in the industry, all the money is wasted. We can not afford to waste money delaying the inevitable.

    My opinion: Become competative, and we will help you, or die. The time of brand idiocracy is over. “I’m a chevy/Ford/Dodge/Mazda/Toyota Man” is pure stupidity. If you make crap we will not buy it. MAke better stuff than anyone else and the beauty is that people will buy it. The American industrial machine was built on the simple concept of making it better than anyone else. The founding and driving priciples of Toyota Corp was INVENTED AND PERFECTED my AMERICANS in AMERICA during WW2. We were idiots for abandoning the concepts and returning back to the good enough philosophy. Now we are looking at a global meltdown because of our stupidity. Bailout? No more bailing out a sinking ship, build a new boat and everyone jump in that one. We need to dismantle the tattered remains of our diseased industries and build a new, stronger, Industry of automotive production. One that say “No, we will not sell this junk, if it isn’t better than what the rest of the world can produce, shelf it”. America can do it but the excuses and the crying have to stop. We, as an industrial nation, failed. We chose to let good enough be the norm for too long, and now we eat of that fruit. It is time to stand up and be what we always could be, and in times of great need ahve always been, the best.

    Give me total control of any of the big three and I could turn it into something great in under 5 years. The small men and tiny women that lead us here to begin with do not deserve to lead anymore. Sadly, From the president down there is a lack of greatness. We have mistaken charisma for leadership and words for action. Time has come for great people to rise up and lead America, and the world, back to what it should be. I’m ready. Are you?

  5. Jeremy The Great says:

    Wow, that went long

  6. Mickey says:

    Very good!

  7. Justin – Personally, I don’t have a problem with a domestic bailout per se – I’m not wild about helping Cerberus Capital out of a bind (they have billions of dollars, they’re not at the end of their rope just yet), and I think GM is terribly mismanaged (as Jeremy said), but I don’t know that we have an alternative. Closing a major auto manufacturer would be devastating to the economy and millions of people.
    ***
    My issue with this “bailout” talk as it relates to Toyota is that people seem to think because Toyota is taking a loan, they must be in trouble. Ridiculous. Google has $8.6 billion in cash and cash equivalents according to their 2008 annual financial statement. They’re earning more cash every day…they’re not cash poor. Only a moron would believe that Google “needs” a loan. Yet, according to that same annual financial statement, Google has almost $900 million in long-term debt…aka LOANS. Why would Google have a loan? They have lots of cash, right?
    ***
    The answer is that ALL companies take advantage of financing when it makes economic sense. Google, despite their tremendous cash position, decided that taking out a few loans (about $900 million worth) made business sense. Would you say that is a bailout? Hell no – that would be dumb. That is why it’s patently absurd to characterize Toyota’s low-interest loan from the Japanese government as a “bailout.” They’re going to take advantage of cheap money – it’s called a “good business decision” and it’s a completely normal aspect of corporate management. Toyota has plenty of cash, plenty of un-collateralized assets, and absolutely does not NEED a loan…but if Tokyo offers a low interest loan, why would they say no? That’s as good as free money.

  8. TXTee says:

    I’m waiting on someone to bail me out….I’m not in a bind but I wouldn’t mind some financing to take a nice vacation or get a supercharger for the heck of it.

  9. Matt The Techy says:

    Hey Jason (admin) get real, Toyota has burned through about $7.0 B in cash in the last few months. I would not point to their so-called positive cash flow until you have read their 10k or 10Q (or Japanese equivalent) to verify the source of funds. It may not have been from car operations it may have been from financing, asset sale, liquidating short-term investments, etc. Read before you speak.

  10. Mickey says:

    Matt one problem in your claim. You state “It may have been”. When you tell someone their claim is wrong and you write “It may have been” doesn’t show it is or it isn’t. Either it was from car operations or It wasn’t from car operations. You need to be positive in what you claim or dispute. Maybe Jason may have read or didn’t read before he wrote this thread.

  11. Jeremy The Clearly Biased says:

    Matt, put down the glass pipe. Cash flow is cash flow. If i sell my soul for a million $ that is cash flow. Sustainability was never implied. LEts cut the mess and put the real statement down. Toyota is in a VASTLY better position, Financially, than the “Domestics”. They were better equiped to deal with the changing market. Now the Big Three are going through the school of adaptability via the 2×4 method. I hope this works, I really do. Best case is for all 3 to come back better than ever. That would force “Yoda” to fight hard to stay ahead which means better vehicles for everyone.

  12. Matt – You’re correct – I didn’t verify to see where the money came from. Still, I think my point is pretty clear: Toyota has positive cash flow, Ford, GM, and Chrysler do not. Their financial situations are completely different. The news reports we linked to also show that the loan is not actually being requested by Toyota Motor Company, but rather Toyota Motor Credit. The idea is to help TMCC gain some liquidity so they can keep extending loans to car buyers. There’s always more to the story, but the bottom line stays the same – this is nothing like a bailout.

  13. dave says:

    Ford just post 2.3 billion in profit last qtr… even if it was from special accounting…using your process who cares right?

  14. Mickey says:

    True Dave, but why is Ford trying to get the union to give more concessions? If you are making so much why go after the union?

  15. Dave – It says here that Ford didn’t take a bailout. Positive net cashflow usually means profits, and profits mean a healthy corporation. It’s still a little early to celebrate, but it looks like congratulations are in order for Alan Mullally and Bill Ford for turning FMC around.

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