Why Toyota Will Stop Production in Venezuela

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Toyota (NYSE:TM) saw great success in 2013 as it proved capable of weathering recalls and a revival of Detroit automakers. In its plan to push even further in 2014, Toyota is going to have look outside of Venezuela. Bloomberg reports Toyota de Venezuela will put the brakes on production beginning Feburary 13 due to parts shortages and a foreign currency system described by analysts as “paralyzed” in the beleaguered country. There is no date set for a return to manufacturing for Toyota.

The Venezuela auto market took a turn from unsteady to dismal in recent months. Cavenez, which tracks the local auto industry, reported a total of 722 automobiles sold in January 2014, a drop of 87 percent compared to the previous year. Toyota accounted for 225 of those 722 unit sales, but the 291 vehicles the automaker produced represented nearly every vehicle manufactured in the country in January. Neither Ford (NYSE:F) or GM (NYSE:GM) has produced any automobiles in Venezuela in 2014. Next up is Toyota.

According to Bloomberg, the foreign exchange crisis in Venezuela has made it nearly impossible for local factories to get dollars to pay for car parts. As a result, assembly lines are stopping without any clear sign they will reopen in the near future. In Toyota’s case, administrative staff will join factory employees when the lines stop February 13.

Toyota will have to continue its push to expand market share in other countries in the region. In August, Toyota executives outlined a plan to boost Toyota’s fortunes in South America, an arena it had neglected for years. The record profits of 2013 may allow the automaker to invest more heavily in Brazil and other markets where growth is possible.

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