The automotive industry has big numbers in it’s sales and people but especially accounts, which is why some need saving – like the three big Americans – and others could save. This is the case in Japan, where Prime Minister Shinzo Abe has been asking the big companies for help, needing their money to bolster the country’s ailing economy. And Toyota, with cash sitting in bigger piles than ever, is beginning to comply, with analysts talking about a new $37 billion cash program in the works.
Haruka Kazama, an economist at Mizuho Research Institute is predicting a turning point for the Japanese companies, which until now have been working on building large cash reserves, so as not to be caught off guard anymore – with the financial crisis and Japan’s March 2011 earthquake and tsunami still fresh in their memory. “This year might be the turning point for them to change that tendency,” Kazama said. “They’re now able to start investments they’d postponed.”
The Nikkei 225 Stock Average benchmark has grown 69 percent in the past year on the account of Abe’s financial and fiscal policies that weakened the yen, boosting exporters’ earnings from overseas. In this climate, Toyota became once again the rising star of the economy, with shares doubling in the 12 months through August 2 as the yen weakened 21 percent against the dollar. This also prompted the net income to almost double to 562.2 billion yen ($5.7 billion) last quarter (more than GM and VW can account for, together). This happened because of the weaker yen, but also because US sales rose once again.
Toyota had for the quarter a record cash balance of 225 trillion yen (it exceeds Italy’s economy, for example), with cash and marketable securities rising 11 percent, according to Bloomberg analysts. This means the company can now respond to the Prime Minister’s call for help, as Abe is trying to challenge the conservative approach of top Japanese companies in order to jump start the Rising Sun’s economy, which has stagnated for the past two decades.
Toyota is now raising capital spending and research expenditure by 10 percent this fiscal year, paying workers the highest bonuses since 2008. They are also targeting to return 30% of profit to investors through dividends, so payouts will increase as income climbs. And, as the company accounts for 75 percent of its ownership in Japan, this means even more money comes back to the economy.