Even Toyota (TM) Needs A Loan

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It was never supposed to come to this. The global recession has hurt car companies with weak balance sheets such as GM (GM) and Nissan and forced them to turn to their governments for financial assistance. But not Toyota (TM). It was too well run and had too strong a balance sheet. Until now.

According to Reuters,  “Toyota Motor Corp has applied for a loan backed by the Japanese government to help its finance arm cut funding costs as the global crisis tightens access to credit.” Because of its relative financial help the largest car company in the world will have access to the capital at low interest rates.

In a perverse way, the news may be good. A strong financial arms means that Toyota may be more willing and able to extend loans to consumers as their appetite for buying cars returns. That is becoming more likely to happen as the age of the average car increases and tax rates are lowered under programs in the new budget.

If one car company is likely to recover before any other, it is Toyota because of its huge distribution network, reputation for quality, and fuel efficient vehicles.

Having some extra cash in the bank will help

Douglas A. McIntyre