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Toyota to Leave the North American Market?

Toyota to Leave the North American Market?

By menno

July 22, 2009



Toyota is the top automaker in the world and has grown to this point by using methods put into place by one lone individual crying in the American post-war industrial wilderness. His name was Deming, and his message was (paraphrasing) “make it right the first time and it’ll be less expensive, better for the customer and more profitable for the manufacturer.” He also laid out how best to continually improve. The Japanese took this message and ran with it, patiently decimating the competition over half a century.

Toyota supplanted GM as the world’s largest automaker—just as the world economy collapsed. Specifically, the US economy is tanked, kaput, flushed. For a long time to come. The Great Depression lasted from 1929-1942, after all; and that was when the nation was not trillions of dollars in debt (and adding $1.8 trillion more in 2009 debts alone).

Then, too, you have the Canadian and US governments tilting the playing field dramatically towards their domestic carmakers, by owning and supporting GM and Chrysler, as well as writing law and rebate language specifically for their benefits at the expense of free-market competitors. Toyota’s displeasure with the state of affairs recently surfaced when the Premier of Ontario aimed rebates at GM’s future hybrids—after Toyota have put thousands of new jobs into Ontario (while GM pulls jobs and sends them to China and Mexico).

In addition, multiple Chinese automakers stand ready to enter the US market with the tacit financial support of their government. How many US market “goods” are currently made in China that used to be made in Japan thirty years ago?

What if Toyota executives believe that the US economy is going to entirely collapse? Pulling out of a market temporarily is not unheard of, specifically for the on-again/off-again South American nations which have seen hyperinflation first hand over the past couple of decades.

Toyota as a company is, first of all, not used to losses. Where are their losses right now? Exclusively in North America. So says Toyota’s CEO in North America in the Detroit News. In plain English, Toyota says, “no level playing field, no profits, no prospect for profits; time to leave North America?”

I don’t just mean close down all of the plants and simply import cars. I mean, depart—as did Isuzu, Daewoo, Peugeot, Citroën, and many others.

Obviously, that’s an extreme scenario. If, in twenty or thirty years, the North American economy recovers sufficiently to again profitably export cars here, the company would no doubt wish to return under the guise of Daihatsu (50% owned by Toyota). A small remnant, Subaru, could stay if it is profitable in North America; Toyota just increased their ownership level of Fuji Heavy Industries (owner of the Subaru brand).

A Toyota withdrawal would be an enormous PR disaster for the current North American regime, in terms of showing a total lack of confidence in the US dollar, literally astronomical deficits and the NAFTA tied-economy (i.e. the lack of future economic health prospects for Canada and Mexico).

Backing off from the nuclear option, Toyota seems certain to pull the plug on NUMMI and close it down (having already been left to hold the bag by their “partner” GM), mothball the Mississippi factory indefinitely, consolidate production and use US plants for the US market, reduce hours of the workforce to match requirements, severely restrict the number and types of vehicle available to only the profitable and better selling lines, and massively lay off Ontario workers by curtailing exports to the USA.

The alternative (total pull-out) would be very damaging for the United States; therefore perhaps the US, Canadian and Ontario Governments should sit down with Toyota executives and have a frank conversation, starting with a great big “thank you” for first investing so much into North America, a second big “thank you” for investing so much into hybrid technology and finally by confirming that the playing field will be left level for everyone at the earliest possible timeframe.

Because if Toyota leaves North America, the only companies which would gain market share would be Honda, Hyundai/Kia, Nissan and Ford in that order (IMHO), as Toyota intenders would rarely, if ever, even consider GM or Chrysler products. Whether these companies could be profitable in North America even with Toyota out of the market is another matter entirely.

If the most profitable and efficient automaker cannot make a profit here, what of the lesser companies? Is North America a cesspit of money-loss for the automotive industry? The current regime believes they have forestalled a cataclysmic auto industry collapse. That market forces cannot overcome their magical thinking. History proves them entirely wrong.

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