Guess that Toyota recall will continue to hurt for a while
Toyota is a brand that has been synonymous with quality over the years. While they remain a high-quality automaker, the recent Toyota recall (including the little Prius braking problem) have but a bit of a damper on their financial outlook. Not only will it cost Toyota millions to perform the recalls, but Standard & Poor’s have downgraded Toyota Financial’s credit rating in light of these questions regarding vehicle quality. Will shrinking credit mean shrinking Toyota prices, and hence the need for smaller car loans?
They’re officially on “watch negative”
The AA long-term CreditWatch for Toyota and Toyota Financial has been dinged, as have those of Toyota suppliers Denso, Aisin, and Toyota Industries. Standard & Poor’s suspects that the dip in Toyota Financial’s credit will not be resolved until May 2010 at least.
The official reason given for the downgrade is “increased concern over the potential negative impact on Toyota’s business risk profile of unfolding developments related to recent quality-related issues.” Stuck accelerators, improperly designed floor mats and defective braking systems in Japan and the U.S. have a tendency to do that, no matter how much the actual risk may have been overblown. Decreased sales and a business strategy that must accommodate for massive recalls are good for the bottom line in the short term, hence the credit rating decrease.
Toyota forecasts profit after major loss in 2009
We all know 2009 was a tough year for automakers. And for some, it goes back years before that. Toyota’s conservative fiscal policy (get it, GM?) has placed them squarely on the road to recovery, so the recall only took Toyota Financial and company down by a single notch. The Prius recall hasn’t even been figured into the rating yet. Thus, Standard & Poor’s continues to watch like a rubbernecker passing a horrible traffic accident, because of course things can always get worse.
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