Why Toyota would like to see GM rescued

16 December 2008

A known devil is better than an unknown devil, specially if it is one that you can beat.

Apparently, General Motors, Ford and Chrysler are not the only ones praying for their rescue. Rival Foreign car makers, specially Toyota, are reported to be endorsing some form of federal aid to keep the Big Three afloat.

"We support measures to help the industry," Toyota Motor spokeswoman Mira Sleilati was quoted in the media as saying. "We just want a strong, competitive healthy industry." After the Senate disapproved of a stopgap measure to provide an interim $14 billion loan that would keep the trio afloat till the Obama administration moves into the White House in January 2009, the outgoing Bush administration is said to be mulling options that would provide American automakers some aid from the $700 billion approved to bailout banks and Wall Street firms.

Though it would seem surprising at first glance, Asian car makers say they have not lobbied against bailing out the Big Three. Given that their collective fate is so intricately intertwined, the fallout of a bankrupt GM and / or Chrysler would be so great that Toyota, Honda, and other Asian auto manufacturers would rather have GM and Chrysler rescued than go out of business.

Foreign car markets produce a total of around three million vehicles a year at US facilities. They see that their production would take a hit if any one of the US automakers went under, since any bankruptcy out of the Big Three would cause a ripple effect across the auto parts supplier industry.

On account of the extensive overlap between the car companies' supplier base, most parts in an automobile have a single supplier manufacturing them. No wonder that the consequential bankruptcies would disrupt production severely and for a prolonged period. That would mean months before Toyota would be able to resume normal production.