Word: profitably
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...mistakes by overexpanding. With new plants in far-flung places from China to the Czech Republic, Toyota has added capacity for an additional 1.5 million vehicles a year by 2006, bringing annual production to 8.5 million vehicles. That's a lot of metal to move at a profit, and it's only getting tougher. Rising commodity and energy prices are increasing manufacturing costs. And looming interest-rate hikes, the bane of new-car sales, may make even today's volume tough to sustain...
Indeed, for all Toyota's strengths, the company needs a truck hit in the U.S. to offset weaker prospects in other areas. While Toyota is expanding rapidly in Europe and China, those sales tend to be concentrated in the compact-car segment, in which profit margins are low. In Japan, where Toyota intends to launch its Lexus brand in August, the company may have a hard time expanding market share, already at 44%. The dollar's slump against the yen, meanwhile, makes Japanese exports more expensive...
...With some of its biggest rivals in disarray, Hyundai sees an enticing opportunity to build on its progress overseas. Slammed by rising costs and slumping sales, General Motors recently shocked investors by predicting a first-quarter loss, and Ford followed this month by downgrading its 2005 profit forecast. Chung is determined to keep the pressure on. He's moving Hyundai's product line away from its traditional small cars into larger, higher-profit vehicles. In October, Hyundai unveiled a small sport-utility vehicle, the Tucson, and later this year, the company will launch a new high-end sedan...
...market position remains insecure. The next few months will be especially challenging. With a host of new models coming out and its U.S. plant just revving up, Hyundai may have a harder time maintaining quality. "They're not out of the woods yet," says J.D. Power's Parker. Dwindling profit margins are another problem. The average Hyundai car retails for 10-15% less than a comparable Toyota or Honda in the U.S., but with rising labor costs and a weaker dollar, Hyundai must persuade customers to pay more so that profits keep growing. Last year, Hyundai's earnings edged...
...risks in not growing at all. If I had my choice, I'd take the risk of growing too fast." He argues that his company is healthier than it has been in months. After suffering a $27 million loss between last October and March, the airline reported a record profit of $13 million for the April-June quarter...