My point is that if the economy stays off the rails Toyota isn’t going to be in any better shape. European car companies are already lining up. Chinese car companies are lining up. You can’t run a company in an industry that sucks down capital when the the financial system is broken.

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I don’t know about Toyota, that might be true for Honda though. Toyota made 40 billion the last 3 years while GM lost 60. Even last quarter in ‘car-mageddon’ they managed to pull in 1.5 billion.

This quarter is going to be hideous, so they probably only eek’d out a small profit or broke even. But with their massive equity and cash/investments they could ride out probably 10 years of this.

Additionally, if the economy stayed ‘off the rails’ and the gov’t sat on its hands, GM is done by Christmas, that is 22% market share up for grabs…I’d wager close to half of that goes to Toyota. Good Christmas present for them.

I agree the difference between the Japan situation in the 90s and the US now is the reaction time. If I remember correctly, massive injections started about 7-8 years into the thing.

Whether or not there bubble was greater there than the US now…that remains to be seen still I think, but hopefully that remains true, lol.

The problem is more with what they didn’t do — and that is straighten the banks before cutting interest rates and trying stimulus programs and so forth. Consequently all this stuff was like pushing on a string. It wasn’t until they copied the Swedes and started injecting money into the banks that things turned around.

Also they were way too tentative. Too many baby steps that the Japanese like so well. When you do stimulus you need to do it fast and on a large scale. The “massive” stimulus you’re talking about is only massive if looked at over a period of years. It was actually very little dribbled out over a long period.

The bubble was far greater than anything we’re seeing here. For example, with respect to the real estate bubble, at one point before the crash the value of real estate in Tokyo was greater than the value of all the world’s stock markets, which if you think about it is sort of shorthand for the capitalized value of the world’s GDP. At no point was the value of all US real estate in the same category, and the US is a lot of real estate.

Their timing was also terrible in that they didn’t start anything of any scale until deflation has set in. Once deflation sets in you can be truly cooked. A major stimulus before deflation occurs has a very good chance of succeeding; a major stimulus after deflation is established has to be magnitudes greater to get the same result.

Finally we don’t have the same problem with the savings rate and the postal service that the Japanese have. This is too complex to get into here but it’s a huge and difficult part of the Japanese puzzle.

I’ve actually done OK in Japan but part of that of course is currency.

They were definitely on the edge. My point is that if the economy stays off the rails Toyota isn’t going to be in any better shape. European car companies are already lining up. Chinese car companies are lining up. You can’t run a company in an industry that sucks down capital when the the financial system is broken.

FWIW here is an OP Ed piece you may find interesting:

http://www.nytimes.com/2008/11/19/opinion/19romney.html?_r=1&hp

Massive government intervention and NOT letting big things fail is not the solution here.

May I direct your gaze to Japan in..um, lets say, oh, 1990-early 90s, almost 20 years ago…total meltdown there, banking and real estate (sound familiar?). Japan tried to prop it up, put ’stimulus’ in the system, massive public sector hiring, etc… then big time gov’t bailouts (took a lot longer than America’s 9 months, but it came just the same – 97-98ish), they would not let anything go under it felt like.

Nikkei Index in 1990? 40,000
Nikkei index today? 7,960

-80% return is a pretty good investment for 20 years right? The were so bad they ‘bridged’ one crisis to the next.

So if we extrapolate the same results here, (if America chooses the same path),the DOW topped out at around 14,000, that means we should be seeing 2,800 in a decade or so. (Side note: I hate using the DOW as a benchmark…I want to use S&P, but the majority don’t associate with it)

Part of what caused the sell-off today was Congress’s apparent decision to let the automakers hang out and dry. This makes bankruptcy more likely for all 3 of the automakers. First, GM goes, followed by the other two. That starts the dominoes falling as more parts of the economy start failing and the job losses rapidly escalate. So it looks like we will soon be facing Depression #2. Hope you’re all prepared for that. The reason the Big 3 are looking for money is because no one (or very few) are buying cars. If you watched the testimony, GM was asked why it could not repatriate its profits from overseas sales. Waggoner said sales in Europe are already down and it appears Brazil is about to follow suit. I imagine it will spread to Asia, although those governments will try to prop up their economies, unlike the US in its current approach.

BTW, I’m looking for the DOW to hit 7000 for its first bounce. No telling where it will go after that. Just using the old 50% rule.

#86 Statik – “DOW closed under 8K today, first time since ‘03″

Which makes the obvious point that the car industry’s problems are not a GM problem or a Ford problem per se. The CEO’s in their testimony tried to make that point but it always gets lost, probably because if admitted then the issue becomes why has Congress so screwed up, which is not a question members of Congress want asked.

Basically the entire economy is off the rails. This is just one manifestation, and if the economy doesn’t get back on the rails soon then Toyota will be in line as well. I was thinking this as the congressman from Texas, the one who can only be described as an annoying little jerk, kept asking whether the companies could guarantee that they could pay back the loans. The answer of course is that if the Congress does it’s job then yes. If it keeps screwing up and collectively the companies are selling less than 10 million vehicles a year then no.

This is not that hard.

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Sorry, Don…your wrong on this one.

The economic collapse is a fortunate excuse for GM, the DOW was at 11.5Kish only 2 months ago…13K entering the year. The CEOs ‘attempted’ to make this connection, but no one was that gullible.

GM had dropped over 60 BILLION before there was anything like this happening (2007 and earlier). GM was hemmoraging over 10 billion way back in 2005.

When the car business was booming and sales where expanding and even homeless bums on the street had access to credit in 2004, 2005, 2006 and 2007 GM was still losing money under there massiv debt and legacy costs. As a example…me, I was hear pounding the table saying GM was done well before any of this ‘credit crisis’ happened. All this did was speed up GM’s endgame by 6 months.

It will be a stretch for you to prove GM was anything less than living on the edge, even when times were good.

Paulson refused to link executive pay cuts and bonus elimination as conditions on the loans. He knew these folks were so greedy that they would rather let the company fail and take their money than the other way around. I think it is time for the Lee I. $1 and the unions need to immediately adopt the 2010 pay structure as a show of seriousness. Otherwise it may well be the end game. $71 an hour is a joke. I am an engineer and barely make over half that. Get real. I have had one dealing with unions, in Chicago I was demoing a system at a trade show and had to tip the union $100 to let me unplug my computers so I could make my flight out.

Obama said that there must be a winning plan, he doesn’t want to see them back for more, or simply fund them to see failure.

The 2010 Fusion doesn’t look too bad.

They’re global mega corporations for crying out loud, they’re allowed to have jets! What kind of nonsense is that? “Oh you have planes, we’re not going to bail you out.” What?! Did they ask the banks and insurance companies if they had private jets and were willing to give them up for a bailout? I don’t think so. It’d be one thing if this was Circuit City asking for a bailout while in possession of a jet fleet; its not though. Despite their poverty, GM and Ford are global giants. Give them a break with this petty matter. Chrylser on the other hand…

Which makes the obvious point that the car industry’s problems are not a GM problem or a Ford problem per se. The CEO’s in their testimony tried to make that point but it always gets lost, probably because if admitted then the issue becomes why has Congress so screwed up, which is not a question members of Congress want asked.

Basically the entire economy is off the rails. This is just one manifestation, and if the economy doesn’t get back on the rails soon then Toyota will be in line as well. I was thinking this as the congressman from Texas, the one who can only be described as an annoying little jerk, kept asking whether the companies could guarantee that they could pay back the loans. The answer of course is that if the Congress does it’s job then yes. If it keeps screwing up and collectively the companies are selling less than 10 million vehicles a year then no.

This is not that hard.