Toyota posts bleak results for quarter

by Hiroko Nakata

Toyota Motor Corp. said Thursday it posted a 28.1 percent drop in group net profit for the April-June quarter as sales in North America, the biggest market for many Japanese carmakers, were hit hard by the U.S. economic slide.

It is the first-ever drop in both quarterly group sales and profit at the automaker in output terms since it started to disclose quarterly earings in 2002.

In the April-June quarter, Toyota posted ¥6.22 trillion in group sales, down 4.7 percent from the same period last year. Its operating profit tumbled 38.9 percent to ¥412.59 billion and its net profit fell 28.1 percent to ¥353.66 billion.

Toyota’s bleak earnings results followed huge losses recently reported by its U.S. rivals. In Japan, Nissan Motor Co. said Aug. 1 that its group net profits for the April-June quarter plunged 42.8 percent.

Growth elsewhere in Asia, the Middle East and Central and South America failed to offset sales slumps in the U.S., Europe and Japan, said Mitsuo Kinoshita, Toyota’s executive vice president.

A stronger yen against the dollar also ate into profits earned overseas. Toyota is also being hit by raw materials costs surges, he said.

“Right now, the business environment is rapidly changing,” Kinoshita said. “Under the circumstances, we need to take quick and flexible action.”

Last month, Toyota announced it was suspending production of large pickup trucks and sport utility vehicles in the United States for three months from Aug. 8.

The decision was a strategic turnaround for North America. Just last year, Toyota plunged into the full-size pickup truck market, one of the last bastions of U.S. makers General Motors Corp., Ford Motor Co. and Chrysler LLC.

Prompted by slowing business in North America, Toyota recently laid off some 800 temporary workers at Toyota Motor Kyushu Inc. The wholly owned subsidiary builds the Lexus and other models, many of which are exported to the United States.

Nevertheless, Toyota has not lowered its forecast for the full year. The company expects operating profit to fall by 29.5 percent to ¥1.6 trillion, group net profit to drop 27.2 percent to ¥1.25 trillion, and sales to fall 4.9 percent to ¥25 trillion.

“Since only the first quarter of the year has passed, we cannot yet change our earnings forecast,” Kitoshita said, adding that all the company can do is lower the sales target and the exchange rate that the earnings figures are based on.

In July, Toyota cut its global sales target for the year to 9.5 million units, down from the initial 9.85 million, reflecting sluggishness in the U.S., Japanese and European markets.

The automaker announced at the press conference on the day that it was revising its exchange rate figure for the full year to next March to ¥105 from ¥100 to the dollar. The rate is still much stronger than its ¥114 exchange rate for the business year to last March.

Kinoshita said that although economic conditions in the U.S. will likely remain harsh for the next two quarters, the U.S. market will continue to be “a pillar of our business” over the long term.

Kinoshita also said the company is reviewing its sales forecast of 10.4 million units for 2009. “We will release the new forecast in the next two to three weeks,” he said.

Chrysler-Nissan talks

NEW YORK (Kyodo) Chrysler LLC has been discussing an agreement under which Nissan Motor Co. would produce midsize sedans that Chrysler would sell under its own name in the United States, the Wall Street Journal reported in its electronic edition Thursday.

Their talks have centered on having Nissan produce a version of its well-received Altima sedan for Chrysler, the paper said, quoting sources.

The two carmakers announced an agreement in January to have Nissan build subcompacts for sale by Chrysler under the U.S. firm’s brand on an original equipment manufacturing basis.

In April, they said Nissan would provide Chrysler with a new subcompact for the OEM sales and receive large pickup trucks from Chrysler.

The U.S. paper quoted a Chrysler spokesman as saying the company has “no new alliances” to announce.