Car Wreck: Honda and Toyota

Summary

In 2009 Honda Motor Co. and Toyota were the most envied car companies in the world. Now they are the most troubled. Yesterday, Honda said it was powerless to stop the forces afflicting it. The company had to withdraw it profit forecast for this fiscal year and posted earning that declined 56% on production disruptions and weak sales for the quarter ending September 30. Also the Japanese yen has risen 3% against the dollar. This undermines the competitiveness of Japanese-made autos and other goods and reduces the value of profits earned overseas. Also Thailand has had to stop exporting on certain autos where flooding has swamped a big swath of its industrial areas. Because of the shortages from Honda in Japan, the company is on track to lose even more than a percentage point of U.S. market share this year, and Toyota nearly three points of share. Since 2009 Toyota has dropped 4.5 percentage points to 12.5% through the past September. Consumers are also not as interested in the style of Honda’s automobiles. The 2012 Civic has been criticized for being less-than luxurious on the inside and being below the curve in technology. The car now needs a complete makeover and Rick Case, who owns the largest dealership in the U.S. in Fort Lauderdale, FL. Due to the earthquake even Mr. Case has been struggling to recover with sales. Honda is already thinking of building a new location in Mexico to produce the fit subcompact, a car that is now exported from Japan. Toyota is resisting the urge to find other locations for their plants. Toyota is adamant about maintaining its plants in Japan. The company is willing to wait for the yen to weaken rather than move production. The yen strengthen and hurt Toyota in the early 1990s, and then later the currency weakened. The reverse of fortune for the car companies is strange since when General Motors and Chrysler where bankrupt Toyota and Honda reached their peak.

Analysis

The article focuses a lot on how Japan...