Toyota would be in the red by $186 billion, which is the highest debt of any corporation in the world. The latest data from StockApps.com reveals that Toyota has not only overtaken Volkswagen as the most indebted automaker but it’s become the most indebted company in the world. For the 2021-2022 fiscal year, the Japanese giant would have accumulated a net debt of $186 billion.
Of course, it can be normal for large corporations to run up high debts, especially in the automotive sector these days. Several manufacturers have recently invested with great fanfare to adapt to electrification.
However, these debts become problematic when they exceed the assets. Such a scenario puts a company at high risk of bankruptcy if it were to encounter a financial obstacle, a reduction in its profits, for example.
Toyota is not necessarily in a bad situation. Admittedly, it is true that the automaker remains at risk from the volatility of interest rates, but according to its financial statement for 2021/2022, the company still has around $224 billion in current assets. Toyota also remains profitable. For reference, it is already recording almost $600 million more in profit than last year. However, disruptions in the market could quickly destabilize it.
One thinks, among other things, of the multiple supply problems that the entire automotive industry is currently experiencing, not to mention the challenges that Toyota itself must overcome internally, such as the high voltage cables of the RAV4 hybrids and Prime or, again, the recall of the bZ4X/Subaru Solterra, which prevents the two manufacturers from marketing them on the scheduled dates. In short, Toyota is in a precarious situation.
Volkswagen is following closely
The list of the 8 most indebted companies of 2022 includes only three automakers: Toyota (1st place), Volkswagen (2nd place), and Mercedes-Benz (6th place). However, if the financial portrait of Mercedes-Benz seems, all in all, to be in good shape, the situation is not so rosy at Volkswagen.
Not far behind Toyota, Volkswagen is the second most indebted company in the world with a total debt of $185 billion.
Volkswagen’s deficit stems from two places: long-term debts caused by the diesel engine scandal, but also from a massive investment in electrification. The other part of this debt would come from shareholders’ assets.
However, unlike Toyota, which still seems to be adapting badly to electrification, Volkswagen is in a better position thanks to its family of ID vehicles, which is already registering dazzling sales figures, despite a significant lack of inventory. However, Volkswagen is in the red but has made an investment that could pay off.