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COMMENTARY / JAPAN


TOYOTA PREPARES TO SPEND BIG, BUT IS IT SMART TO INVEST BILLIONS ON THE FUTURE?

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 * Akio Toyoda, president and chief executive officer of Toyota Motor Corp.,
   said that during past crises the company cut costs and investments and grew
   substantially leaner, but "lost necessary muscle.” | BLOOMBERG

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 * BY ANJANI TRIVEDI

 * Bloomberg

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   May 19, 2020
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New York – Big, futuristic investment bets on the post-coronavirus period still
feel too early. Yet Toyota Motor Corp. seems to be confident that the dollars
will matter.

That stands out in a world where most rivals can barely think about cash flows
for the next six months, let alone investments a year from now. While guiding
toward an 80 percent drop in operating profits for its 2020 fiscal year, Toyota
says it plans to drop capital expenditures by around 3 percent and keep that
spending at ¥1.35 trillion ($12.6 billion), while lowering research and
development only 1 percent. As a portion of net revenues, R&D would rise to 4.6
percent to about ¥1.35 trillion, up from 3.7 percent, which is the average since
2017.



Toyota is doing what it hasn’t during previous crises that damaged supply chains
and businesses around the world. In a speech during last week’s earnings call,
President Akio Toyoda recalled the four difficult years after the financial
crisis, made worse in 2011 by a devastating earthquake and tsunami in Japan and
flooding in Thailand. The company cut costs and investments and grew
substantially leaner, but “lost necessary muscle.” Toyoda said that “because we
stopped everything to stop the bleeding, including investing in the future, we
ended up needing some time to strengthen our company composition.”




KEYWORDS

Toyota, carmakers, Akio Toyoda, investments, COVID-19
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