Toyota profit drops 77% after earthquake, tsunami

David Gura May 11, 2011

Toyota profit drops 77% after earthquake, tsunami

David Gura May 11, 2011


Steve Chiotakis: Toyota used to run a commercial way back in the 80s where people jumped up for joy. Today, nobody was saying ‘oh what a feeling’ in celebration. The Japanese automaker said its profit plummeted in its fourth quarter by 77 percent.

It’s no surprise with the production problems in earthquake and tsunami ravaged Japan. And all the cars the automaker’s had to fix for various issues.

Marketplace’s David Gura reports.

David Gura: Toyota has struggled to get its operations up and running again, at full capacity. Ashvin Chotai is with Intelligence Automotive Asia. He says the company can’t get the parts it needs.

Ashvin Chotai: What the tsunami has exposed is how dependent it is on very often one or two key suppliers which in this case happened to be in the earthquake zone.

The disaster followed a two-year stretch when Toyota recalled some ten million cars with acceleration problems.

Ed Lapham: They were just really starting to dig themselves out of that hole when they got hit with this.

That’s Ed Lapham, executive editor of Automotive News. Toyota became the world’s largest automaker in 2008, during the economic meltdown, but its reign may be coming to an end.

Lapham: It’s now almost certain that General Motors, which is in very strong recovery mode, will surpass Toyota, and will again become the world’s largest automaker. How’s that for a change of fortunes?

I’m David Gura, for Marketplace.


JEREMY HOBSON: Toyota said today that profits fell 77 percent in the fourth quarter, on the heels of the natural disasters in Japan.

Let’s get the details from Marketplace’s David Gura. He’s with us live. Good morning.

DAVID GURA: Good morning Jeremy.

HOBSON: Well, profits were the lowest in six quarters I saw. How much of that can be attributed to the earthquake and tsunami?

GURA: They had a huge effect. I talked to Ashvin Chotai. He’s managing director of Intelligence Automotive Asia. And he told me the car maker had been doing a lot better — recovering from the economic slump back in 2008 and 2009. But their operations really took a hit. And Chotai said Toyota has had — and continues to have — problems getting the parts it needs to build its cars.

ASHVIN CHOTAI: As we know, the global supply chain is quite interrelated and what the tsunami has exposed is how dependent it is on very often one or two key suppliers which in this case happen to be in the earthquake zone.

And another problem, Chotai told me, is that in the aftermath of these disasters, the Japanese government has decided to test its nuclear plants. And not just the ones affected by the earthquake and tsunami. So there are periodic power shortages and power outages across the country. That’s had an effect on production too, Jeremy.

HOBSON: So, big effects from the natural disasters and its aftermath. What about the problems, David, that were facing Toyota before the quake, such as the gas pedal issue and all those recalls?

GURA: You know, that’s something that still looms large. Around 10 million cars were recalled. Ashvin Chotai told me that Toyota had made a lot of progress restoring its image. But these production problems couldn’t have come as worse time for the company. As a result of the disruptions, it’s at risk of falling behind its main rivals around the world — General Motors and Volkswagen.

HOBSON: Marketplace’s David Gura in Washington, thanks David.

GURA: Thank you.

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