Toyota “Dumping” Cars on U.S. Market

http://www.reuters.com/article/ousiv/idUSTRE4BL0EM20081222?sp=true

As the Bush administration chides the domestic auto industry and demands that they come up with a plan to be profitable by March 31st of next year, it stands idly by while Toyota “dumps” its cars on the U.S. market.  “Dumping” is the unfair trade practice of selling products at a loss in an export market.  By its own admission (see the linked article), Toyota is, in fact, operating at a loss and dumping vehicles. 

Toyota Motor Corp forecast a first-ever annual operating loss, blaming a relentless sales slide and a crippling rise in the yen in what it said was an emergency unprecedented in its 70-year history.

Toyota, the world’s biggest automaker, had been expected to issue its second profit warning in less than seven weeks after domestic rival Honda Motor Co also cut its outlook again last week, but the downward revision was bigger than predicted.

Of course, this is a new development resulting from the rapid slide in the dollar vs. the yen but, nevertheless, it puts Toyota in violation of international trade rules.  If Toyota fails to immediately raise their prices, the U.S. should file a complaint with the WTO (World Trade Organization).  If that doesn’t yield swift results, the U.S. should quickly impose tariffs on imported Toyota cars and parts.  And it should take the same action if other Japanese exporters report operating losses. 

“This is very, very, very bad,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. “There’s a chance they could fall into the red in the next business year as well.

“This is also not just a problem for Toyota. What is good for Toyota is good for the Japanese economy.”

Remember when the same was said of General Motors and the American economy?  It’s still true, regardless of what other economic segment du jour  the free trade cheerleaders offer up as our latest and greatest economic salvation.  One day it’s high tech.  The next day it’s services.  The day after that it’s health care, as though we can have a thriving economy by everyone getting sick and nursing each other back to health. 

The truth of the matter is that there is no way to gimmick an economy back to health that has been sickened by the loss of one of its key segments.  Naturally, giving away our manufacturing sector through misguided trade policy has helped the “global economy” but it has weakened our own.  For decades we have tried to prop it up by enhancing other segments – first “high tech,” then services and finally the construction segment of the economy – but it was all doomed to collapse.  An economy needs all segments to remain healthy, including manufacturing.  It’s time to reclaim that segment and it’s time for nations like Japan to stand on their own two feet instead of scavenging the economy of the U.S.

7 Responses to Toyota “Dumping” Cars on U.S. Market

  1. blighty says:

    where in the linked article does it say anything about dumping cars. All it says is that their sales have dropped sharply. in this case, operating at a loss just means that their income is less than their expenses. not that they are selling their cars for less than they are worth.

    • Pete Murphy says:

      Blighty, the WTO defines “dumping” as selling cars at a loss. What they are “worth” is purely subjective and does not factor into the trade rule. Toyota’s admission that they are losing money in the U.S. is proof positive of “dumping,” a trade practice banned by the WTO.

      • Pete Murphy says:

        In addition, it doesn’t matter whether the loss is because of a decline in sales, a rise in the yen, or anything else. Selling cars at a loss is a violation of WTO rules, period.

  2. […] it was Toyota announcing a loss.  Today it’s Sony. Japan’s Sony Corp (6758.T) will likely suffer an […]

  3. […] this month, Toyota announced their first-ever annual loss in their 70-year history.  (See “Toyota Dumping Cars on U.S. Market.”)  The strenghtening of the yen is one of the major factors.  In response to this, Toyota […]

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