The first sign of global recession while US economy outperforms the rest of the world – Toyota guidance very significant
Yani Shingrani
May 8, 2008

A stronger yen, soaring raw-material costs and a continued U.S. slowdown make it difficult for the most profitable car company in world to produce record-breaking results any more. It underscores the impact shrinking auto demand in the U.S. is having on car makers'' profits, even as they scramble to offset losses with aggressive growth in China and other emerging markets. China will take another 50 tears before it can offset weakness in US economy.

The easy market for Asian and European companies in US is perhaps a history. These international companies taking advantage of open market in US will have to produce value to continue their profit growth in the future.

Toyota said it expects to see earnings fall 27% to ¥1.25 trillion ($12.01 billion) in the fiscal year ending March 2009. "We are facing a severe business environment. However, Toyota considers this headwind as a valuable opportunity to turn into a more flexible and stronger company," Toyota President Katsuaki Watanabe said.

Perhaps this the first sign that world is hit with the prospects of a global recession while US economy outperforms the rest of the world.

The American economy is resilient but has turned value oriented. It will not be easy for the Japanese or Chinese enterprises to dump goods in US anymore. It will also not be easy for Indian companies to dump services into the US economy.

US Dollar will rise, as the US economy outperforms the rest of the world. Foreign direct investment will also rise further boosting the strength of dollar. The interest rate differentials will prefer US currency over other currencies in the rest of the world.

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