Toyota Motor Essay Example | Topics and Well Written Essays - 1750 words

Toyota Motor - Essay Example As per the figures available, TMEM had complied with its market demands in 2000 by importing 76 % of the automobile spares from the Japanese plants and assembling them in its European plants. For the next fiscal year, the company reported operating losses of JPY 9.897 billions. The main problem TMEM faced here was simple but peculiar. As the euro was continuously trekking down, except for a few occasions, the revenues in shape of euros did not equal to the expenditure figures when converted into JPY. This cycle repeated all over for three years since the inception of TMEM pushing itself into losses. In addition to these conversion losses, the Japanese subsidiary had to contend with reduced margins on sales in an atmosphere abetted by cut throat competition from the native automobile manufacturers compounding its problems further. as it had to shell down more Euro currency at times towards pound sterling payments made to the UK plant which also supplied automobiles after assembling them. TMEM was caught in this vicious circle of currency conversion. The parent company played the role of an observer as it could not afford to make payments direct from its coffers on behalf of its subsidiary. However, in such a case, it could have been forced to lose more JPY reserves as the yen was playing low against the pound sterling. From this circle of operations, one thing is emerging clearly. The parent company had miscalculated the future of euro and expected an early forward march of its value in international markets. It also expected an early entry of the UK into the European Monetary Union (EMU). These two miscalculations had boomeranged on its operations in Europe leading to its ever increasing dependence on a weak euro. TMEM's problem has therefore been the result of a wrong analysis on the future of the newly cre ated euro currency. The following charts (Internet, graphs) show how the pound and yen values against the euro picked up from 1991 to 2001. In the beginning of 1991, the euro value was equal to 0. 712825 GBP. During the end of 2001, it equalled to 0.618756 GBP indicating gains for the pound.