Toyota Crushes the Competition

Businessweek reports that Toyota is about to report some amazing earnings numbers for this year. The company predicts it will have profits of $12.9 billion. And this is occurring in the same market that Ford and GM are witnessed significant losses. Incredibly, Toyota's operating margins are likely to rise to nearly 10% which would be the highest in the industry.

Sales in the United States, Toyota's most profitable market, don't show any signs of slowing. Analysts credit Toyota with aggressively rolling out bigger trucks and SUVs to compete with American companies at the same time it retains focus on the smaller, more efficient vehicles that Toyota is known for.

Toyota's green image, largely the result of the success of its Prius hybrid, is somewhat greater than the truth. Toyota's vehicles haven't been getting much more fuel efficient lately. Rather, the company is responding to consumer preferences for bigger vehicles. Given the rapidly rising price of gas at the pump, it is unclear that this trend will continue.

Toyota struggled with enormous recalls between 2004 and 2006 that briefly out-paced new car sales. The company has refocused on quality and integrating its non-Japanese supply chain more carefully. Toyota is struggling to avoid a backlash from American consumers by building more vehicles in the USA, but has been slower to build production in North America than either Honda or Nissan.

Toyota today stands astride one of the more competitive global markets. In spite of national protections that sometimes give its rivals a big leg up, the company has built itself into one of the most profitable companies in the world. The challenge of much higher gas prices will challenge the entire auto industry, but Toyota's nearly $13 billion profits will give it quite an advantage.