Posted by: Ian Rowley on March 2, 2009
Even after recent downgrades Toyota’s credit rating remains the envy of other automakers. After all, before Moody’s and S&P cut its ratings in February, the company was one of only a handful of nonfinancial firms in the world with the highest ratings. Yet, Toyota is now following other automakers and turn to the state for a helping hand.
According to the reports , Toyota is in talks to borrow a little over $2 billion from the Japan Bank for International Cooperation to secure funds for its U.S. operations.
Toyota, which expects to lose $3.9 billion this year, confirmed it is discussing the loan but declined to discuss details. If it does reach a deal it will be the first Japanese automaker to apply for the funds from the emergency fund, which is tapping $5 billion from the Japanese government to lend to Japanese corporations that operate internationally. If needed, it is likely JBIC will receive morefunds further down the line, if necessary—the $5 billion figure is being loaned from from Japan’s $1 trillion of foreign exchange reserves. “Taking into account the current severe conditions for those trying to procure foreign funds, we’ve decided to lend foreign currencies (from the reserves) to the JBIC as a temporary, extraordinary measure,” Kaoru Yosano, Japan’s new Foreign Minister said earlier today. More automakers are expected to follow Toyota’s lead. (Separately, last month Nissan and Mitsubishi Motors both signaled their intent to agree loans with the Development Bank of Japan.)
Local media reports add that Toyota is applying for the loans because normal borrowing channels in the U.S. have dried up and that the cash will be used by its auto financing division. Analysts responded positively, saying automakers should tap the funds if they are available, particularly as the government-backed loans are likely to be at lower rates of interest than other sources. In Tokyo trading, Toyota’s stock closed down 0.3%, a better performance than the market as a whole.