Toyota Recall Financing Dilemma
Edgardo Donovan
Touro University International
FIN 501
Dr. Herbert Weinraub
Module 5 ' Case Analysis
Monday, March 19, 2007
Toyota Recall Financing Dilemma
"Toyota Motor Corporation is a Japanese multinational corporation and the world's second largest automaker making automobiles, trucks, buses and robots and providing financial services. Based in Toyota, Aichi, Japan, the company boasted a total vehicle production of 9.018 million vehicles in 2006. It is also the world's eighth largest company with revenue of $179 billion as of 2006. Toyota is the world's most profitable automaker Toyota sells its vehicles in Japan, North America, Europe and Asia. The company was founded in 1933 and is based in Toyota City, Japan." (Toyota)
Dealing with a recall is never a positive situation and will cost Toyota $925 million dollars which it will most likely borrow from its future earnings at nominal discount rates. However, given Toyota’s positioning as the world’s eight largest and most profitable automobile company they will be able to take this problem in stride. The biggest danger associated with the recall will not be short term capitalization. To maintain its impressive rate of growth Toyota will have to conduct effective public relations damage control in an attempt to safeguard its pristine reputation as a manufacturer of highly reliable automobiles.
The Toyota Motor Corporation has been around for greater part of last century. It really started to make a strong entry in the North American and European car markets in the mid 1970’s. Their successful product offering combining low prices and high reliability have been huge factors in its successful profitable market-share growth ever since.
"For more than a quarter of a century, we at Toyota have relied on the talents of American designers and engineers to help ensure that our vehicles meet local tastes and...