AP Flunks 'Meltdown 101' in Comparing US and Foreign Car Companies
You would think from reading yesterday afternoon's report by the Associated Press's Tom Murphy that companies like Toyota, Nissan, and Honda are not that far from finding themselves in the situations US taxpayer bailout recipients General Motors and Chrysler are in.
Murphy tries mightily to make the foreign-owned companies' situations look serious, at one point even putting out the howler that they are "not quite" as bad off as Detroit's Big Three.
You've got to be kidding me.
Murphy's "Meltdown 101: Foreign automakers struggle too" apparently just arrived from the School of Hard Laughs. It is mostly written in a Q&A format. Here are some excerpts (bolds are mine):
..... carmakers from Stockholm to Tokyo report problems of their own in a slumping global economy.
Here are some questions and answers about the state of carmakers outside the U.S.
Q: Which foreign automakers are hurting?
A: Take your pick.
Toyota expects to lose money on an operating basis for the fiscal year ending next March. It has never reported an operating loss in the 67 years it has given such figures.
Its Japanese competitor, Honda Motor Co., expects its profit for the fiscal year ending in March to be less than a third of what it earned last year. ....
Q: What are their problems?
A: Foreign automakers are being hurt by many of the same issues that have crunched sales for their American competitors.
A double whammy of sorts battered carmakers worldwide this year. Soaring fuel prices earlier in the year stoked demand for smaller - and less profitable - vehicles. And big industries like car manufacturing aren't nimble enough to adjust to that demand. .....
Q: So foreign carmakers are in the same boat as their U.S. counterparts?
A: Not quite. U.S. automakers were struggling before the recession hit. They've been contending with a declining market share and seeking relief from huge costs like retiree health care. .....
Q: Will the bailout for U.S. automakers give them an unfair advantage competing against their foreign counterparts?
A: Not at all. (Chairman of the Center for Automotive Research David) Cole thinks it will help level the playing field a bit.
He noted that foreign automakers who sell cars in the United States already receive a big helping hand in their home countries, where the cost of health care and pensions often is absorbed across the whole country.
For the record, here are few points exemplifying how "not quite" true Murphy's "not quite in the same boat" answer is:
- Toyota's estimated full-year operating loss of $1.7 billion for the year that will end on March 31, 2009, and its net profit after other items of $555 million, is miniscule compared to GM's net losses of about $22 billion in its most recent four quarters.
- Toyota passed GM as the world largest carmaker in the first quarter of 2007, and has lengthened its lead significantly since then.
- Though their sales are declining, Japanese makers continue to gain market share, because the declines at other companies are worse. In November, "US automakers' share of their home market decreased to 47.7 percent from 49.9 percent, while Asian brands' share increased to 43.4 percent from 42 percent."
- Honda, as noted, is still making money.
- A week ago, Mark Steyn observed that Toyota's market capitalization was over $100 billion. In today's trading as of shortly after noon, GM was down about 15%, pegging its worth at about $1.7 billion.
Murphy had not a word to say about the Big Three's unionized labor costs, inflexible work rules, or "job banks." He failed to note that GM and Chrysler were (and even after the "bailout," still possibly are) on the verge of bankruptcy, while no one believes that to be an even remote possibility at any of the Big Three's competitors. He didn't even tell us that non-Big Three companies are seeing sales declines, but that they are mostly nowhere near what the GM and Chrysler are experiencing.
In "Meltdown 101," I give Tom Murphy a solid "F."
Cross-posted at BizzyBlog.com.