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Toyota wants a government loan. Let the outrage begin.

Posted by: David Welch on March 3, 2009

In yet another sign that Toyota Motor Corp. is run by human beings, the company’s finance unit is asking the Japanese government for a $2 billion loan, writes my colleague, Ian Rowley. Toyota blames tight credit in the U.S. for its newfound borrowing needs. For all its strength, Toyota is not immune.

But here’s my question: Will we see outrage among Japanese voters and some media as a company hoarding $20 billion in cash asks for government money? My guess is no. The Japanese government and Central Bank have a long history of intervening on behalf of their home companies. The Central Bank has kept the yen weak for years to boost exports of cars, electronic goods and other items to the U.S. So loaning a few billion bob to Toyota won’t raise a hackle in Japan.

Here in the states, however, loaning to U.S. automakers sparks some outrage. This is despite the fact that state governments have showered foreign carmakers with hundreds of millions in tax incentives. I understand the argument. Toyota performs year in, year out. The U.S. car companies have been stumbling for decades.

The sad part of it is that Detroit was finally fixing some long-standing intractable problems. The 2007 labor deal slashed wages, found a creative solution for retiree benefits and the cars are much, much better. All of this was rolling out just as the financial crisis hit. But these days, Americans have little sympathy for home teams that have lost for so long. Detroit’s fixes may have come too late to save all three companies and get the popular imagination to look their way.

Reader Comments

The Mad Hedge Fund Trader

March 3, 2009 11:03 AM

I’ll tell you what GM’s problem is. My dad was a religious lifetime GM customer, buying a new Oldsmobile every five years. Once he even flew to Detroit for a factory tour and drove his new prize home. Thirty years ago I told him he was doing GM no favors by buying their cars, and the only way to force them to improve a deteriorating product was to buy better made German and Japanese vehicles. This was right after the State of California had forced auto makers to install seatbelts on new cars. Airbags and ABS brake systems were still years away. His response, “I didn’t fight the Japs for four years so I could buy their cars.” (He was a Marine). GM’s problem is that my Dad passed away seven years ago. Of the original 17 million WWII veterans, 1,500 a day are dying, and there are only 1.5 million left. All of them loved Detroit because it built great Jeeps, Sherman tanks, and half tracks. Their kids prefer German, Japanese, Italian, Korean, and soon, Chinese, and Indian vehicles. It is no coincidence that GM’s problems really accelerated with the passing of the “greatest generation.”


March 3, 2009 12:08 PM

America is the only country in the world that continually roots against the home team, economically speaking.

Thank You, DW, for stating some of the points the Big 3 have been trying to make for years (yen manipulation, transplant tax incentives, Japan govt assistance, etc.). I just wish I had seen this in the mass media 4 months ago.

David Gobel

March 3, 2009 1:30 PM

I have purchased 3 Buicks, 1 Chevy, 1 Oldsmobile in my life. My last purchase was a Hyundai build in the US South. It was 2/3rds the cost with better finish and quality along with a bumper to bumper warranty significantly longer than GM's. It was a simple decision to make.

It would be nice to return to a world where companies made products and profits without needing corporate welfare, but until that happens, I will vote with my most powerful dollar bills.


March 3, 2009 4:47 PM

It's a pity what your are saying it's true.. never american cars had been so good as recently; high quality, reliable, very good design, economic.. unfortunately tining couldn't be worse!! of course american people can live without Ford Explorer but are they sure to live without Ford Focus, or Chevy Malibu? GM is not only Chevy Suburban, it's Saturn Aura, Cadillac CTS, Buick Enclave, Chevy Cobalt, Pontiac G8 and many many wonderful cheap economic cars and light trucks too. The same Ford group and Chrysler. Some cars must be produced better, but have you ever seen on road a japanese ca as sexy and bold as Chrysler 300? Be sincere with yourself, lte's give them a chance to recreate themselves!!

Eirik Thorvaldsson

March 3, 2009 8:24 PM

Sorry David, it does not seem that Detroit has been "stumbling" for the past 20 years. Those Executives are not paid millions per year to be stupid. They are doing what the foreign shareholders want.

They have been methodically shutting plants in the USA, and using the profits to build plants overseas. They have been laying off Americans, and buying cheaper parts from foreign factories.

They constantly advertize that the only thing that matters is "lowest initial price", not safety, not durability, not resale value. All the ads you see are price, price, price!

Like Donald Duck, we have carried it to an extreme in all industies. We have not retained enough good jobs in the USA, so we cannot afford to buy the Chinese auto parts, TVs and PCs, the Indian clothing and software. They have become addicted to US, and we to them, so they are having massive layoffs too.

At least the foreign automakers in the USA have been expanding in areas where it has been difficult to find a living-wage job, even if they import half their content as sub-assemblies - usually the engine and transmission.

Remember that GM imports whole cars too - from Australia, Korea, Germany, Sweden....

Eirík Þorvaldsson

Paul (Vw)

March 3, 2009 11:20 PM

>>> [Toyota’s] finance unit is asking the Japanese government for a $2 billion loan...Will we see outrage among Japanese voters...Here in the states, however, loaning to U.S. automakers sparks some outrage

I suspect there is more than an order of magnitude difference here. A paltry $2 billion for Toyota's *finance unit* is nothing compared to the ever increasing monumental cost of the Detroit3 bailout (with no end in sight or reliable outcome).

As for "outrage"? What are American taxpayers supposed to do instead? Driver their Honda Civics to the nearest Pontiac dealership and sing Kumbaya? In this country it's a long established virtue to question public policy. Yes Detroit has made significant strides, but that doesn't mean we should shovel cash to them without debate.


March 4, 2009 7:51 AM

To The Mad Hedge Fund Trader: You're living in the past. I would absolutely agree that the 80's and 90's quality from Detroit was embarrassing (my father-in-law owns an '85 Cadillac Cimmaron, the low water mark for GM quality).

That was then, this is now. I find it interesting that most of the quality metrics indicate GM and Ford is equal to or better than others. I understand perceptions lag but you have to look at the facts of today...product is much, much better than 5 years ago. Perhaps should I ask...have YOU driven a Ford (or GM) lately?

Quite sad for our country...I go to Germany and see the roads filled with Audi's BMW's and Mercedes...proud of their automobile industry, yet we spit in the face of ours. Apparently we have to lose all those jobs (and supplier jobs) before we understand the value of it.


March 4, 2009 3:38 PM

These foreign automakers are parasites feeding off the US. Especially the Japanese companies.For years their governments have manipulated their currancies to their advantage.Enough is enough.


March 5, 2009 12:22 PM

It took decades for Detroit's image to slide due to the myriad of stupid decisions by management. Does anyone think the recent well received product lines will change perceptions overnite?They can pretty much write off Gen X and Gen Y. It's a shame but the Big 3 can survive but not with the number of divisions they have now. If anything, Japanese, Korean and German auto companies have provided a great number of GOOD paying jobs that are much more than assembly as design, engineering and casting creates a lot of demand for the transplants.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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