News & Current Affairs

October 2, 2008

Toyota eyes European growth

Toyota eyes European growth

Toyota Avensis

The launch of the Avensis was a low-key affair

Given its significance, the Monday night preview of Toyota’s new Avensis was a remarkably low-key affair.

A few dozen journalists and company executives witnessed the car’s unveiling at the event at the Pavillon Gabriel in Paris.

Tadashi Arashima, president and chief executive of Toyota Motor Europe, started out by bemoaning the “current business situation”.

By the time he got around to talk about the Avensis – a model that is not only designed for and built by Europeans but also kick-starts a frantic launch period as Toyota aims to bring 18 new models to market by the end of 2009 – any celebratory mood had been replaced by earnest concern.

However, Toyota’s new models will include a few attention-grabbing cars. These include the next generation Prius, which will have its global premiere at the Detroit motor show in January, and Paris premieres of the iQ mini-car and the Urban Cruiser.

We expect to grow our market share month by month in 2009
Tadashi Arashima, chief executive, Toyota Motor Europe

“We have a lot of new products that are meeting the current market conditions,” says Mr Arashima, pointing to how cars developed to meet stricter emission regulations in Europe are also delivering the fuel economy currently demanded by frugal consumers.

So does this mean the Japanese carmaker is set to take advantage of the economic downturn by boosting its market share in Europe?

When BBC News posed the question during a pre-launch briefing, Mr Arashima responded with a modest smile.

“Maybe by accident,” he said. “We didn’t really expect the market to go down so quickly.”

Bouncing back

In Toyota’s case, sales have slipped 15% so far this year in Western Europe, though a 25% rise in sales in Russia helped to compensate for the slump.

Nevertheless, its European market share has shrunk to 5.3% during the year to date, down from 5.6% a year ago.

Mr Arashima acknowledges that in 2008 it will be “tricky” to match the sales seen in 2007, when Toyota hit its 11th consecutive sales record in Europe.

However, he insists the tables will turn come the New Year.

“I am fully convinced there is no better time for our new line-up to hit Europe,” Mr Arashima says.

“We expect to grow our market share month by month in 2009.”

Shrinking markets

Globally, Toyota hopes to add 200,000 sales to its books during 2009, to 9.7 million cars and other vehicles.

Western Europe is definitely going to go down
Thierry Dombreval, chief operating officer, Toyota Motor Europe

That would be no mean feat at a time when pretty much all its rivals are cutting back.

In Western Europe, total car sales by the industry as a whole are set to fall 10% in 2009, according to Toyota’s own internal forecast.

“Western Europe is definitely going to go down,” Thierry Dombreval, executive vice president and chief operating officer of Toyota Motor Europe, told journalists during a briefing.

“Spain is now down 32% in September, and the UK is very fragile.”

In Russia, Europe’s fastest-growing market, growth is set to slow to 5% next year, from some 25-30% growth so far this year, Mr Dombreval added.

This latest prediction is much lower than Toyota’s previous forecast of 15% sales growth in the Russian car market during 2009.

Long-term growth

Toyota’s optimism is not limited to its growth in market share in 2009. Over time, regardless of whether or not the current economic downturn is lengthy or not, the company predicts that global demand for cars will grow fast.

“Cars are indispensable anywhere in the world for people to move, and the current financial situation does not change that,” says Mitsuo Kinoshita, executive vice president, Toyota.

August 9, 2008

Fannie Mae unveils loss of $2.3bn

Fannie Mae unveils loss of $2.3bn

Courtesy BBC

Problems in the US housing market have pushed mortgage finance company Fannie Mae into the red.

The group sank to a net loss of $2.3bn in the three months to 30 June, against a profit of $1.97bn last year.

It comes days after its sister company Freddie Mac posted worse-than-expected results and its top executive warned house price falls are not over yet.

Both government sponsored firms own, or guarantee, nearly half of the nation’s mortgage debt.

Shares in Fannie Mae sank in the wake of the announcement, falling 9.8% to $8.98.

Difficult market

As mortgage guarantors, Fannie Mae and Freddie Mac, must pay out when people default on their loans.

But as a result of recent woes in the US housing market and subsequent sub-prime crisis the pair have run into severe difficulty.

Fannie Mae says it has the capital to weather the storm, but its looking more and more stormy by the day
John Raines,
Exclusive Analysis

Fannie Mae said that the current housing crisis had added to its woes to the tune of $5.3bn in credit expenses.

The latest losses at the firm – which came in at more than three times analysts’ estimates – followed a $2.2bn loss for the first three months of the year.

“Our second-quarter results reflect challenging conditions in the housing and mortgage markets that began in 2006 and have deepened through 2007 and 2008,” said Daniel H Mudd, president and chief executive officer of Fannie Mae.

Cost cutting

He added that the firm had also taken steps to raise an additional $7bn to help it tackle the “most difficult US housing market in more than 70 years”.

As part of the plan Fannie Mae is slashing its dividend by more than 85% to 0.05 cents, raising its fees and has taken steps to cut its costs by 10%.

The group also said it would stop purchasing ‘Alt-A’ loans – loans made to borrowers with good credit but little proof of their income, or people who either put down a small deposit, or no deposit, for their loan.

But there was little to offer hope in near-term future with Fannie Mae warning that increased volatility in capital markets and deteriorating credit conditions meant that it would face more losses.

Bail-out

Last month, the federal government offered a financial lifeline to the two beleaguered companies offering to extend their line of credit.

However, the financial aid may leave the taxpayer facing a bill of $25bn over the next two years.

“The taxpayer is stuck if they have to be bailed out,” John Raines, deputy director of political risk for Exclusive Analysis told the BBC.

He added that reports had suggested the actual cost could end up being anywhere in the region of between $10bn to $100bn.

“Right now, Fannie Mae says it has the capital to weather the storm, but its looking more and more stormy by the day.”

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