Beware the Ides of March 31: Toyota's Reversal Proves it's About More Than Cars

DETROIT - So March 31 turns out to be the big day. It's the day Toyota Motor Company expects to post its first-ever loss, $1.66- to $1.68-billion for the fiscal year, depending on whose rounding and yen-to-dollar conversions you believe. Toyota President Katsuaki Watanabe's (pictured) latest forecast reverses an earlier profit prediction of a positive $6.8 billion for the fiscal year ending March 31, 2009. That's also the day General Motors and Chrysler LLC have to present yet another set of "turnaround plans" to the federal government in exchange for $13.4-billion worth of loan guarantees that President Bush just approved (plus another $4 billion available in the first full month of President Obama's administration). If the feds aren't satisfied with GM and Chrysler's plans, it can call back the loans and possibly force one or both automakers into bankruptcy. Who will make that determination? Since the Detroit Duo are getting their bailouts from the Treasury department's $700 billion Troubled Asset Relief Program (TARP) funds, Secretary Henry Paulson is the de facto person in charge of these short-term loans. Most likely, the real person in charge will be Obama's proposed "car czar," though there are indications the president-elect won't name anyone until well into March. The good news is that Bush's loan guarantee plan gives GM and Chrysler (and Ford Motor Company, if and when it needs a requested $9-billion line of credit) a lot of latitude in their plans. Someone in the Obama administration, or perhaps on Capitol Hill, will have to decide whether or not GM and Chrysler met their requirements. Bush wanted them to provide plans that would include concessions from unions, suppliers, dealers and creditors, the last of whom are asked to convert bonds into equity. The bad news is that the California Democrats in control of Congress will push for more fuel-efficient, green cars. I don't have any problem with fuel-efficient, green cars, but the first thing the automakers need to do is make it to 2010, when cars like the Chevrolet Volt are scheduled to launch. Before word of the Bush loan guarantees, GM indicated it would delay retooling a Flint, Michigan, factory that would make the extended range electric Volt's internal combustion engine, which of course was a ploy to get the money. The point is, automakers don't have money to build money-losing new technology cars anymore than the average consumer has $40,000 to pay for a Chevy. The next time GM's Rick Wagoner, Ford's Alan Mulally and Chrysler's Bob Nardelli sit before a House or Senate committee, probably for a round of longer-term loans, they'll be able to point to Toyota's own problems in the current market, both in the U.S. and globally. With some $95 billion in capitalization, Toyota won't be begging for emergency funds anytime soon. Still, Detroit can talk of how Toyota first planned to convert a Mississippi plant originally meant to build SUVs to Prius production. And how after Prius sales dropped in half last November, Toyota put those plans on hold. They can tell Congress that it's not about fuel mileage anymore. It's about a lack of consumer confidence.