Tuesday, December 23, 2008

Perspective on Toyota's "operating" loss

The sky isn't falling on Toyota and the difference is as simple as operating versus actual losses.

Toyota yesterday predicted its first annual operating loss since 1938. That means the company's primary business operation -- making and selling cars -- cost more than the revenues gained from the same. For one year. In a down economy.

Some are comparing this to the Big Three as a way to take heat off the United Auto Workers union. Bluegrass Roots exults:
"Yes, today Toyota with no union workers and what so many try to say is such a superior product is posting a loss for the first time in 70 years themselves."

This is inaccurate. Toyota didn't post a loss and they are not likely to any time soon. When you combine Toyota's operating loss with the surplus from their investments, fringe benefits, and all the other financial activity outside of their core business, Toyota is still profitable.

Ford, Chrysler, and General Motors can't say the same thing and the main difference is labor costs. That is why no one at Toyota is talking about needing a bailout from anyone and GM and Chrysler are now being bailed out by Canada.

By the way, The Lexington Herald Leader's coverage of this operating loss is only slightly better than the left-wing blogs. And that is only because the Herald Leader left the word "operating" in their story. They still could have easily given the rest of the story, though that may have conflicted with an agenda.