Now Toyota wants a government loan

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.

Reader Comments

Schmeltz

March 3, 2009 8:21 AM

This article really suprised me in that Toyota appears to be the first of the Asian Auto Companies to pursue emergency government loans. Most regard them as one of the healthiest Companies in the world. Here's what I struggle to understand: How can companies like Mitsubishi, Suzuki,Isuzu, and even Mazda, and Subaru, continue to do business in the U.S. in a recession of this magnitude? How can they make a business case of it?

Frank A

March 3, 2009 3:46 PM

The USA is their biggest market. We love Japanese cars in this country. Unlike Europe which is much more discerning about vehicle dynamics.

Derek

March 3, 2009 5:36 PM

I'm sure they don't need it but a low interest loan is good to have if its on offer. No harm in asking, I would if I was them. The US companies need it to survive, *sigh let them die already

Matthew

March 22, 2009 7:50 AM

Ford didn't need one, but I agree, let Chrysler die. Chrysler and GM have put some highly unreliable products out. Ford didn't need a bailout, and that shows that the people want Ford.

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