Part 2: [Well, Maybe Not Toyota]

The Wall Street Journal
"S&P Downgrades Toyota Bond Rating"
By: William Sposato

While all of the six major auto companies showed increases in sales this February, one still has something to worry about. Just days after the good news was delivered, Toyota was knocked off the "high horse" as ratings agency Standard & Poor's lowers Toyota's "long-term corporate credit and senior unsecured-debt ratings." The agency says this is a result of "weak profitability." This just another blow to the auto group, for they are still recovering from the world-wide vehicle recall that occurred almost a year ago. The article continues to timeline Toyota's most recent ratings: from 1985 to now, the auto company has dropped from AAA to AA+ to AA and now to AA-. In further reasoning for the lowered ratings, Standard & Poor's says that they do not see Toyota's profitability increasing at a high enough rate compared to competitors. Also, they cite the increasing prices of raw materials and gasoline as well as the strong yen as being additional issues for Toyota. 


Thankfully the writer is not one-sided and gives representatives from Toyota the opportunity to speak about the situation too. Toyota's plan to is cater needs to the customers and implement technology that will reduce the response time concerning customer complaint from months to days. Toyota believes that an increase in customer likability will help S&P raise the ratings. Even though they have taken this hit, Toyota is still seen as more credit-worthy than Honda and Nissan. They have ratings of A+ and BBB+ respectively. Because of all this, Toyota is in the midst of a massive public relations overhaul to raise its standings with everyone. Rankers think that it won't be until 2012 when an major jump is seen because of last year's massive recall. 


My first question is this: Why did the writer not define the terms on which S&P rates auto companies? Just days before this article was published, Toyota was cited with having a big percentage jump in auto sales. Shouldn't this jump mean that their likability and profitability had increased too? After reading both of these articles, it seems to me that the two are not talking about the same thing. Credit profitability and sales profitability must mean two different things. Also, it was shocking to me that Toyota's ranking has continued to decrease for many years now. In high school, all of my friends drove Toyota's Camry, Avalon, or 4Runner. I do not understand how this can be true when Toyota appeared to be so popular despite the massive recall. I guess I should be looking at a more global perspective rather than a Southern teenagers perspective. Nonetheless, the issue should have been addressed in a more in depth fashion in this article. Writers should not assume that every reader is going to know about the companies and rankings that are discussed. Ultimately, I hope that Toyota can see a turn of events sooner rather than later.