Honda vs Toyota Essay Example

decreased.

During the collapse of the U. S. automotive industry, Toyota and Honda both had the chance to completely dominate the competition. Instead of becoming more innovative and taking over the competition both companies became complacent. This lead to companies like Hyundai, Kia, and Volkswagen becoming more aggressive. With other automotive companies close behind, Toyota and Honda are soon likely to be taken over by the competition. Toyota and Honda’s complacency has also led to a decline in the safety aspect of their cars.

A string of recalls for both companies has proven that Toyota and Honda both have not been putting their full focus into safety. In October of 2012 Toyota recalled 7. 43 million cars for a problem with a potentially defective power window switch. This recall is the largest since Ford’s recall of 7. 9 million vehicles in 1996. A more recent recall for Toyota involves faulty airbags and windshield wiper defects. Honda has also had its fair share of recalls. Honda has very recently issued a recall for 183,000 cars for problems involving unintended braking issues.

Earlier at the start of 2013, Honda recalled roughly three-quarters of a million cars. This recall was due to defects in airbags that could cause them to fail to properly deploy in a crash. The companies that had once topped the charts in safety and reliability have become plagued with so many safety problems that they topped the charts in largest recalls. Toyota had the most vehicles involved in recalls in 2010, while Honda had the most vehicles involved in recalls in 2011. In 2012 Toyota again topped the list of most recalls in the U. S. market.

Although

Toyota and Honda have dealt with major safety issues, they both remain in the top rankings for automotive sales. In 2012 Toyota drove past General Motors to claim the title of world’s largest automaker. In 2008 Toyota also managed to take the title away from General Motors. Although not as successful as Toyota, Honda has regularly been in the upper bracket for automotive sales and production. Profit Margin and Pro Forma A company’s profit margin is computed by dividing its net income by its total operating revenue; thus profit is expressed as a percentage of operating revenue.

This ratio represents a company’s ability to produce a product at a low cost, or sell it at a high price. This calculation is a direct representation of a company’s earnings; however it does not give any insight about the company or its future. It does not give any information about the company’s risk, and it does not take future earnings into account. Also, when analyzing a company’s profit margin, the type of company needs to be taken into consideration. Service companies tend to have higher profit margins than trade companies. The profit margins of Honda and Toyota are 0. 3 and 0. 02 respectively. These two numbers are very similar.

But, since the profit margin of Honda is slightly higher than that of Toyota, it can be assumed that Honda keeps a slightly higher portion of their sales than Toyota does. This does not necessarily mean that Honda is a stronger company than Toyota though. When comparing the two companies, it is important to take all aspects of the corporation into consideration, and not just focus on the profit

margin. All of the financial ratios are meaningful. Below, the financial ratios for Toyota and Honda are listed and compared.