Toyota Makes Four Times as Much Per Car as General Motors

Feb 23, 2015 04:30 PM EST | Jordan Ecarma

The Detroit Three seem to be back on their feet after the financial crisis, and earnings before interest and taxes for last year came to $6.5 billion for General Motors, $6.3 billion for Ford and $3.9 billion for Fiat Chrysler.

But those numbers pale in comparison to Toyota's expected haul of 2.92 trillion yen, or around $24.5 billion, for the fiscal year ending March 31, as reported by the Detroit News.

How does the Japanese carmaker do it? Toyota reports a whopping average profit of $2,700 per vehicle. Ford's $994, FCA's $850 and GM's $654 in earnings per vehicle can't catch up.

Factors including currency exchange rates and wages contribute to the profit gap between Toyota and the Detroit Three.

"There's lots of moving parts to profitability," IHS Automotive analyst Michael Robinet told the Detroit News. "There's investment elements, cost elements and revenue elements--and currency issues can certainly mask improvements but can also mask deficits."

According to financial analysts, Toyota has the weaker yen to thank for its heavy earnings boost. Japanese cars cost less in the United States since the weak yen makes Japan's exports cheaper.

"We believe the weakened yen will help yen-denominated profits to rise faster and enhance Toyota's competitiveness vs. American brands," S&P Capital IQ equity analyst Efraim Levy said in a February note to investors, as quoted by the Detroit News.

In November, Toyota increased the forecast for its full-year operating profit by 9.1 percent based on the falling yen, Reuters reported. Its expected profit of 2.50 trillion yen rose from 2.30 trillion yen and is still short of this month's new estimate of 2.92 trillion.

Besides favorable currency rates, Toyota trimmed costs to increase profits, an executive said.

"Of course exchange rates helped, but we also made efforts to offset negatives such as a rise in fixed costs, with cost-cutting and sales efforts," Executive Vice President Nobuyori Kodaira told a news conference, as quoted by Reuters.

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