Toyota gears up to catch power of China's slipstream

Toyota's delayed push into China is proving that late is much better than never. After watching General Motors and Volkswagen sprint to the lead in the world's number two car market, a recent sales spurt is closing the gap - and making up for daunting problems elsewhere. This month Toyota is expected to scale back its 2008 global sales forecast, shaving perhaps 350,000 vehicles from its initial 9.85m projection. That would translate to annual volume growth of less than 1.4 per cent, against the 5 per cent it first predicted.

Most of the weakness is in the US, where Toyota's sales fell more than 20 per cent in June. Without China, where sales jumped by a third in the first half - double the market's overall growth rate - global turnover would be grinding into reverse. Credit Suisse this week cut its forecast for Toyota's shipments outside China for the fiscal year to next March to 8.7m vehicles from just over 9m. That would be a fall of 2.4 per cent over last year - a shock for a company renowned for relentless sales increases even during bad times, says Koji Endo, Credit Suisse autos analyst.

Having awakened to China's importance, Toyota is cranking up investments in its local joint ventures with the aim of raising capacity to 830,000 vehicles by 2010.

It is also trying to make up for past dithering in other emerging markets. Yesterday it announced plans to triple production in Brazil with a 150,000-vehicle factory to open in 2011. Toyota has plenty of ground to make up there, too.

Solid foundations

It's a clear sign that times have changed when a dividend cut provides welcome relief. By withholding its final distribution, Wolseley has saved £150m. As recently as March - when the UK-based building materials group recommended an increased interim dividend - this grand gesture didn't seem necessary. The question now is whether it is grand enough?

Thanks to its exposure to the US housing market, Wolseley was one of the first to anticipate the economic maelstrom and scale back costs. Having relied on its robust cash flows to underpin an aggressive debt-fuelled acquisition strategy, it now relies on them to make it through this downturn. The focus is on trading for cash, taking costs out at every level, and paying down debt that is uncomfortably close to breaching banking covenants.

Chip Hornsby, the group's highly experienced chief executive, has identified several places from which he can squeeze even more cash. With revenues certain to fall further, more jobs are set to go. He could also realise the value of some of the group's 950 properties. Mr Hornsby is not talking about fire sales yet, but he admits that he has been confounded by the way in which a slowdown has turned into a meltdown in a matter of months.

Finally, he knows he cannot exclude going to the market to raise capital to shore up the balance sheet if the austerity plan falters. He could even sell a big chunk of the business, though that would compromise the strategy hatched in happier times. Wolseley's shares trade at more than five times 2008 forecast earnings, which looks fully valued in the current climate. The group is strong enough not to suffer death by a thousand cuts but only a rights issue or other capital-raising would take debt out of the danger zone. It would be a brave board, however, that authorised a cash call this close to summer holidays in a volatile market. Mr Hornsby will simply have to tough it out until early autumn.

Coup de gaz

Albert Frère, the veteran Belgian billionaire, has been called many different things. Some dub him the Warren Buffett of Belgium. After all, he has spent most of his life buying and selling stakes in large companies and has successfully weathered more than one stock market crisis. Others describe him as a pioneer of European cross-border deals, a consummate corporate matchmaker and a catalyst for change in the businesses he invests in.

Yesterday he completed possibly the biggest coup in his career with the merger of Suez and Gaz de France, creating a new world energy champion in which he will remain a leading and influential shareholder.

Displaying all his persistent character, it has taken him four years of manoeuvring and negotiating to pull off the deal that will on the one hand privatise Gaz de France but at the same time partly renationalise Suez. But the veteran Belgian financier is not about to sit on his laurels. Far from it. He has already suggested plans to increase his stake in Suez Environnement, the water and waste management arm that the merged GdF-Suez group is spinning off. Indeed, he seems to have an eye on the chairmanship of this water and waste utility, which he believes has promising long-term prospects.