toyota, honda, and the yen
As a currency devalues (like the US dollar against nearly every currency), it makes it much more expensive for companies based in other countries to compete - the weak dollar means that when they sell their goods here, they can't get as much money for it.
One graph that has held my interest for the past week is a comparison between the Japanese yen currency stock (FXY) and Toyota Motors (TM):
One expects that as the yen gains on the dollar, Toyota stock to be affected ... but at this rate? A 5% gain for the yen yields a 20% loss to Toyota's market share? Don't forget we've been in one heckuva market lately.
So what's to explain this discrepancy? I took a peek at Honda Motor Company vs. FXY as well:
This graph is much in-line with what I expected. So what's to explain such a huge divergence for TM?
Are they underperforming as a company? (earnings seemed alright) Is this an indication that the Japanese economy is going to be adversely affected by the weak dollar? (Tracking the Euro vs. Daimler-Chrysler didn't give me the same divergence) Is the poster boy of hybrids not expected to perform as well?
What's the deal? I've got an academic itch I can't scratch, and Bert offered no insight (jerk!).
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Terrence
roy
bert
And certainly, these charts don't come close to explaining market share. That would have to come by looking through each company's 10k.
All this is telling you is that Toyota has lost roughly 20% of its shareholder value since the start of the year. Which is surprising, but not out of the ballpark. Because as B-schoolers know, your shareholder value is all about the "your future free cash flows" discounted back to the present value.
I'd say I would only feel safe explaining roughly 4-5% of the valuations drop due to exchange, the rest would be on other factors.
Now keep in mind a few things. How does Honda's market mix stack with Toyota's? If my knowledge of each serve right, Toyota is more exposed to the large truck, SUV side, while Honda has more or less focused on sedans. Makes sense with oil going to $100, that the sedan focus would win out.
Also, Honda has long held the gold standard for manufacturing and operational efficiency. And while Toyota is good, Honda definitely has the leaner, more efficient infrastructure.
So to answer why? I'm not completely sure, but its a complete mistake to blame it just on exchange rates.