The latest developments in the automotive industry continue to be disastrous. As most are now aware, American auto makers will receive a bailout even though Congress was unable to reach agreement on the matter. However, it is not just American automakers that are dealing with the fallout of collapsing worldwide demand. U.S. sales data for the auto industry were released yesterday with cumulative sales plunging 36% in December. The results were abysmal across the board: General Motors (GM) down 31%, Ford (F) down 32%, Honda (HMC) down 35% and Toyota (TM) off 37%. These figures are compared to sales from a year ago and in that time the deterioration in both consumer spending and confidence has been drastic. For the entire year, Toyota’s sales slumped 16%.

Now, Toyota is expecting its first operating loss in its 70 year history. This is certainly not an easy operating environment for automakers, including the world’s largest. As Toyota’s newly-resigned President Katsuaki Watanabe said, “It’s a kind of emergency that we’ve never experienced before. The environment surrounding us is extremely harsh.”

In response to weakening demand in Toyota’s hugely important U.S. market—as well as other markets such as Asia—the company is being forced to tighten its belt. Today, TM came forward with a plan to shut down production for 11 days in February and March for all of its factories in Japan. This is in addition to the three day suspension of operations in January already announced. Clearly, we underestimated the impact that the dramatic dive in demand would have on Toyota–especially in the Asian markets–when we wrote in our July piece that TM would stand to benefit from weakened competitors and gain market share worldwide (Kicking the Tires of Toyota Motors). At that time, gas prices were sky high and we believed that Toyota might have a leg up with its largely fuel efficient line-up.

An interesting piece in the Wall Street Journal by Paul Ingrassia illuminates some of the difficulties facing Toyota.