As we all know, last week Japan was rocked with a devastating Earthquake. Putting the Japanese people and the world economy in a state of emergency. Everyone who has been affected by this natural disaster will be in my prayers. I have confidence that the people of Japan will recover from this tragedy, but how about the well being of the world’s largest auto maker?
Over the lastly few months Toyota has seen rising stock prices and strong growth partially because the “U.S. government reported no defects in Toyota’s software and electronic-controlled accelerator systems”(Bloomberg) The company reached a 52 week high as of march 1st, unfortunately Toyota has had the rug pulled out from under them. When news of the earthquake reached investors, the stock price dropped $10 almost instantaneously. With headquarters being located in Japan, investors fear slowed production, resulting in lower levels of profit. Toyota has evacuated a handful of factories located near the disaster area and suspended 28 manufacturing plants throughout Japan.
How low will the stock price fall? Currently Toyota claims that plants in North America won’t see a shortage in parts, but fears that productions in North America will slow down still lingers. With the power outages across the affected areas, it could be some time before the plants are able to reach maximum output levels of production. “Analysts say the auto industry's global supply chain is so integrated that the loss of even one key supplier could have a major impact on production.” Does anyone have any opinions? Personally, I don’t see immediate shortages occurring as I’m sure a few weeks of Toyota car parts are in reserve; however, until Toyota finally puts a time frame on their recovery, there could be a chance that productions will remain slowed for months to come. What effect would this have on Toyota’s competitors as well as industry stock prices?
-Grant Gaughrin, Yo Investments
As a biased Toyota Camry owner, I have full confidence in the company's full and swift recovery. Toyota has already earned its name in history as a reliable household name, and a natural disaster is only a temporary obstacle in the company's history.
ReplyDeleteToyota has built up its name in over 70 years of corporate history. In WWII it earned a reputation as a producer for the Japanese military. After the war, as nations and companies scrambled to prevent their respective economies from tanking, Toyota stayed afloat by manufacturing trucks, and then civilian vehicles.
And we all know how Toyota managed to uphold its name in the last year or so with the scandal involving its break/acceleration pedal and the unprecedented recall that followed. The fact is, Toyota knows how to keep its business afloat during disasters. A natural disaster may in fact help its reputation once it rebuilds itself completely. Nothing says "reliable" about a company more than tanking through a cataclysmic disaster.
Lest we forget, Toyota also owns Lexus; it is a common misconception that Toyota relies solely on our beloved Corollas and Camrys for profit.
Though stock prices may fall for the time being (I wouldn't be surprised if it hit 10% loss or more), I am fully confident that Toyota's name of reliability will outshine stains on its production, and in a short time period we will see manufacturing at its full potential again.