Toyota’s Profit Plunges with Supply Shortages

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Toyota recently announced a 32% plummet in third-quarter profit margin thanks largely to the March earthquake and September flooding in Thailand which has caused a significant parts shortage and corresponding production issues.

Toyota's Profit Plunges with Supply Shortages

It has been slow going in Thailand thanks to historic flooding that has affected Toyota's production.

As we have reported, Toyota parts shortages due to flooding and earthquakes have lead to vehicle shortages at dealers and canceled overtime at American manufacturing plants. Most industry analysts predicted automakers affected by the earthquake like Honda, Nissan, Mitsubishi, and Toyota would begin to operate at full capacity again beginning late in 2011. However, the flooding in Thailand has now caused new issues for getting parts.

These natural disasters have come at a bad time for Toyota which is still struggling to get beyond its recent quality issues. Most analysts agree executives of the $105 billion dollar company are probably rethinking the same “mass output of cheaply made product” strategy that nearly felled the entire U.S. auto industry back in 2008.

All of these issues combined with a 18.5% drop in their second-quarter margin profit on top of the large third-quarter drop saw the company lose a staggering 80.42 billion yen ($1.03 billion). Additionally, nearly all Japanese automakers and multinational businesses have had tremendous difficulty overcoming an unusually strong yen. [NOTE: For more information on how the strength of the Yen can impact profits, read Currency Exchange Rates and Cars – How They’re Connected]

Before the flooding in Thailand, Toyota predicted its year-end profits by that time would total around 450 billion yen, a figure that has now been completely withdrawn until the floodwaters recede and the full breadth of the damage can be evaluated.

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