Newscasts a day ago breathlessly announced that Toyota Motors this year will be booking a profit, on an unconsolidated basis (Link -J), for the first time in five years. In a press conference, Toyota Senior Managing Officer Ijichi Takahiko attributed the booking of a profit to the Abe government's economic proposals, adding for effulgence's sake, "Ever since the new government took control, it feels as though Japan is filled with the spirit for economic revival." (Link)
What the above tells me is that Toyoda Akio is a dedicated car maker and an atrocious businessman, surrounded by toadies pretending to be businessmen.
An automobile manufacturer should be in the business of manufacturing automobiles for a profit. It should not be a currency play. If the company makes money based on the fall of the yen relative other currencies -- a shift in market sentiments that no one at the company has any control over -- then something is very wrong. Rather than crowing about a profit, the company should be burying the news, embarrassed at its good fortune.
Toyota Motors is a global company, or is at least portrayed as one. At a normal global manufacturing company, however, volatility in currencies is mostly zeroed out in either one of two ways:
1) in the short term by the use of derivatives
2) in the long term in a globalized supply chain and localized plants
Of course, extreme currency events cannot be entirely hedged. However, most of the shifts should be covered.
What Toyota executives seem to be admitting is that their corporation is neither financially sophisticated nor properly globalized (the company having a much higher percentage of its manufacturing base in Japan than its rivals). Indeed, they seem gleeful in this admission.
I have worried about Toyoda's management of Japan Inc.'s marquee corporation ever since he engineered the coup ousting Watanabe Katsuaki as president. The line Toyoda used to lever Watanabe out -- we have expanded too fast and lost sight of the business of making cars -- was absurd in light of the losses having been the result of the Great Recession. Toyoda's expedient excuse came back to haunt the company in the ludicrous lawsuits and U.S. Congressional hearings over mythical unintended acceleration problems, due, according to Toyoda's testimony, Toyota's having expanded too fast and lost sight of the business of making cars. (Link)
Now Toyota executives seem to be saying that if it were not for Abe Shinzo, they would not be able to run the company at a profit.
Tell me: am I too cynical, talking out of my hat or just plain stupid?
Later - Sorry about the typos. A bit of a wild morning this morning.
How are Milton Friedman's ideas holding up? Part 1
12 hours ago