On The Edge? Report Indicates Toyota May Be Running Short On Cash

[Harvey Specter]

Toyota’s Weakening Financials
January 22nd, 2009 at 11:17am

Toyota used to be in such a strong financial position that it earned the nickname the Bank of Toyota. That description no longer replies. Also, many industry observers are under the mistaken impression that Toyota has no corporate debt. That doesn’t apply anymore, either.As part of its ambitious global expansion efforts, Toyota’s borrowing and have debt load more than doubled over the last decade. In 2000 Toyota’s current liabilities* totaled ¥5.5 trillion, right now that stands at ¥12.4 trillion.

Although the company still has a solid balance sheet, it’s not as solid as it used to be. Moreover, the company is projecting it will lose money in the current fiscal year, something that has never happened before in its history.

This helps explain why Toyota is taking drastic action in the face of the current economic downturn, such as temporarily shutting down all of its manufacturing facilities in Japan. Now, even Toyota has to worry about how much cash it has on hand.


In its most recent financial report, Toyota states that it has ¥1.8 trillion in cash, which is roughly $18.5 billion, or about the same level of cash Ford reported in its most recent financial statement.

More tellingly, Toyotas total current liabilities (short term) now match its total current assets. In the past, Toyota’s current assets always exceeded its current liabilities. When a company’s liabilities exceed its assets, it has to dip into its cash reserves to make up the difference-unless its operations are generating positive cash flow. But right now Toyota is not generating positive cash flow.

This is the same situation that the Big Three found themselves in some years back, but failed to address. Toyota is obviously attacking the problem head-on. But it’s surprising to see how close the company has come to the edge of the cliff.

* current liabilities include: borrowing, long-term debt payments, accounts payable and accrued expenses.

[cococly]

Toyota should quit F1, much like Honda did and same as Audi in Le Mans

[q0192837465]

they will be fine as long as managements take proper corrective measures. Toyota will have a much easier time finding investors than the Big 3 because it is not as risky.

[heleu]

Any accountants want to comment?

From my understanding of accounting so far, sitting on a pile of cash is not necessarily a good thing. While cash is easily the most liquid asset, it's also an asset that's not being used to generate revenue.

Toyota is just balancing their budget. They could easily raise more capital if they wanted to with either stock offerings or bonds.

[Eclypz]

so all that article did was state the obvious....lol
All companies are being affected now....big or small. Sure, Toyota might be losing money, but they aren't alone, and given the size of Toyota, they could continue to bleed money for years to come, before they are in serious trouble. I don't see Toyota going anywhere any-time soon.

Everybody always seems to assume that when a company down-sizes, they are in trouble. Although it might be true in some cases, most companies are taking what's called a "proactive" measure to minimize losses.

So, Toyota shut down manufacturing facilities in Japan....why? because NOBODY is buying brand new cars right now. What's the point in pumping out 100,000s of vehicles when they are just going to sit on the car lots?

[thumper]

i can't think of ANY car manufacturer right now who is not in the red right now... it's just a matter of when they decide to announce it publicly (if they haven't already)...

[Carl Johnson]

the big 3 are burning through their cash at a much faster rate than Toyota. Toyota will come out of this crisis better than before they went in. And Ford just posted $5.9 billion loss this morning and F is supposed to be the healthiest of the three.

[EM2]

I don't see Toyota going down anytime soon