Report: Toyota Killing Big Three On Profitability

2015 Toyota Camry (Credit: Toyota)

According to a recent report from The Detroit News, Toyota is absolutely killing the Big Three when it comes to profitability. For each vehicle that the Japanese automaker sells (which is a lot) it makes more money than Ford, GM or Fiat Chrysler. The gap is so incredibly wide that Toyota actually makes more in a year’s time than the Big Three combined.

For all of 2014, GM reported that it made $6.5 billion, Ford claimed $6.3 billion and Fiat Chrysler brought in $3.9 billion, before taxes and interest were factored out. Those are great numbers, until you consider that Toyota raked in around $24.5 billion for its fiscal year. Ouch.

It gets even worse, because the report also claims that calculating for average earnings per vehicle sold, Toyota actually makes over four times what GM pulls in. What makes these findings more shocking is that right now the Big Three are actually doing better than they have in years. Even though the American auto giants aren’t begging for money from the federal government at the moment, this is still a problem that’s concerning.

A few reasons for the difference in profitability were cited in the report. American automakers claim that the Japanese have been engaging in currency manipulation. Thanks to the weak Yen in Japan, the price of exported cars made in the island nation has gone down. Morgan Stanley reportedly found that the weak Yen builds in an extra $2,000 in profit per vehicle that’s exported from Japan.

Another big reason for the discrepancy, and one that’s even more controversial, is the cost of labor. Ford and GM spend big when it comes to their workforce, even when compared to foreign automakers’ operations inside the United States. Still, American automakers have been able to trim some costs, but they still carry a large financial burden. One of the biggest drags on profitability has to do with pension and benefit packages. The Big Three are currently working on modifying such offerings, realizing that their future growth could very well depend on it.