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Toyota Losing Money On Japanese-Built Corollas

Posted in auto industry, Car Buying, Commuter Cars, Compact Cars, Foreign Cars, Import, Newsworthy, Toyota by Kurt Ernst | October 15th, 2010 | Leave a Reply |

2011 Toyota Corolla

Welcome to the world of international business: currencies change value on a daily basis, but you can’t re-price your products according. If your native currency decreases in value, this is generally a good thing since you’ll increase profit without doing a thing. Who doesn’t like money for nothing? On the other hand, if your native currency gets stronger, you can begin to lose money in foreign markets, and that’s exactly what Toyota is up against with the Corolla.

When GM pulled out of NUMMI, their joint venture with Toyota in California, Toyota couldn’t afford to operate the plant at a profit. Instead, they farmed Corolla production out to Japan, as their other North American plant cranking out Corollas (in Ontario, Canada) couldn’t supply enough product to meet demand. When the yen was weaker against the dollar, this was a good plan; now that the yen is strong and the dollar weak, it’s not such a good plan. Given that the yen is at a 15 year high against the dollar, Toyota is losing serious money on their imported Corollas.

Long term, Toyota will produce Corollas (and other vehicles) in their new Mississippi plant, but Left Lane News tells us that’s about a year away from starting up. Their only profitable short term alternative is to ramp up production at the Ontario plant even further; otherwise, you can expect to see a shortage of Corollas on dealer lots. No one’s in business to lose money, and Toyota has lost plenty over the past 12 months.

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