Less than two months after forecasting its first ever full-year operating loss,
Toyota Motor said Friday it now expects that loss to be three times larger than originally expected as global auto sales continue to plunge.
Toyota said it expects to lose 450 billion yen, or $5 billion, in the current fiscal year through March 31 in its vehicle-making operations. The new forecast underscored the deteriorating situation at Toyota, which until recently seemed unstoppable as it dethroned
General Motors last year as the world’s biggest producer of vehicles.
Toyota blamed the larger loss on both steep declines in global auto sales and strong gains by the Japanese currency,
the yen, which lowers the yen-denominated value of overseas earnings.
With no sign of an end to the steep slide in the world auto market, analysts said they expect Toyota to suffer an even larger loss next fiscal year, though they did not offer numerical estimates. They said the company will likely continue to lose money as it struggles to shrink a bloated inventory of unsold cars and trucks.
Toyota must also deal with a glut in production capacity, the legacy of years of aggressive expansion, analysts said. Until last year, the company had been adding plants around the world to meet what seemed to be an insatiable demand for its fuel-efficient vehicles. However, when the global downturn struck, Toyota soon found these expensive new factories sitting idle, putting the company in a tighter financial pinch than many of its rivals.
“Toyota is going to get worse before it gets better,” said Tairiku Sakaguchi, an auto analyst at Shinko Securities in Tokyo. “The question is how quickly they can move to deal with inventory, excess production capacity and other problems.”
On Friday, Toyota said it was pressing forward with restructuring efforts guided by a special Emergency Profit Improvement Committee, which the company established in November. Besides cutting costs, the committee is also planning a new product line-up that it hopes will fare better in the new tighter economic environment, the company said.
Toyota said it was still investing in hybrid and compact vehicles and expected to roll out a new version of its popular Prius hybrid sedan in May. The company said it will start selling the first hybrid model in its Lexus luxury brand this summer.
“The financial problems have spread directly to the real economy,” Mitsuo Kinoshita, an executive vice president, told reporters. “We cannot tell what will happen next year but we hope we are now hitting the bottom.”
A loss this year would be the Toyota’s first full-year loss since its founding in 1937 as the subsidiary of an automated loom company. The company also said Friday it expects a net loss of 350 billion yen, or $3.9 billion, for its entire group, which includes Hino, a truck maker, and Daihatsu, which builds compact cars.
In December, Toyota stunned many here by originally forecasting a 150 billion yen, or $1.6 billion, operating loss — a huge reversal from its record $28 billion operating profit just last year. Friday’s new larger loss forecast reflected how quickly the global auto market has continued to worsen during the current economic crisis, analysts said.
On Friday, Toyota also posted a net loss of 164.7 billion yen, or $1.8 billion, in the three months ended Dec. 31, offering the first glimpse of how last autumn’s global economic downturn affected the once robust automaker. In the same quarter last year, the company posted a 458.6 billion yen, or $5 billion, net profit.
The company said it was particularly hard hit in North America, traditionally its most profitable market. Toyota said vehicle sales in North America dropped 31 percent during the quarter from the same period last year to 521,000 units. The sales decline and losses on interest-rate swaps pushed the company to a 247.4 billion yen, or $2.7 billion, operating loss in North America.
The company also said profits declined in its North American financing business as it set aside more money against possible defaults on
auto loans.
In its home market of Japan, Toyota posted a 164.2 billion yen, or $1.8 billion, operating loss after vehicle sales dropped 14 percent. In Europe, Toyota said vehicle sales dropped 24 percent, pushing the company to a 43.4 billion yen, or $480 million, operating loss.
The company said it fared better in China and other developing markets, where it avoided a loss despite declining profits and sales. Toyota said its vehicle sales in Asia fell 8 percent to 222,000 units.
Toyota also lost the top ratings status with cuts Friday from both
Moody’s and
Standard & Poor’s. Moody’s lowered its rating to Aa1 from Aaa and S&P AA+ from AAA.
In the Red, Toyota Sees Loss Tripling
Originally Posted by Simon Cashmere
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looking cars anyway
