Toyota Motor Corp. said Thursday its group operating profit for the full year to March will probably plunge nearly 74 percent from the previous year as the global financial crisis slows the world economy and curbs car sales in the United States and Europe.
Toyota now expects a ¥600 billion operating profit for fiscal 2008, down 73.6 percent from ¥2.27 trillion logged the year before. That’s way below its previous forecast of ¥1.6 trillion and the lowest since Toyota adopted U.S. accounting standards 10 years ago. The firm also expects a 68 percent fall in group net profit to ¥550 billion.
The revision was blamed mostly on the rise in the yen’s strength against other major currencies, which will erode profits earned overseas when repatriated into yen.
“This is an extremely difficult business environment, (one) we have never experienced,” Executive Vice President Mitsuo Kinoshita told reporters, noting the financial turmoil, including the yen’s sharp appreciation against the dollar, makes it hard to foresee the future.
“Honestly, it’s very difficult to see when all the situations will stabilize,” he said. “I hope things will brighten slightly by the end of next year.”
Toyota also lowered its global sales forecast for the full year to next March. It now expects to sell 8.24 million units, down from its previous forecast of 8.74 million. It sold 8.91 million units worldwide in the last business year.
The profit forecasts for this business year are based on an exchange rate of ¥103 against the dollar and ¥146 against the euro. The rates are up ¥11 and ¥16, respectively, from the rates the previous year’s earnings were based on.
For the half-year period that ended in September, the nation’s top automaker said that group operating profit had plunged 54.2 percent to ¥582.07 billion from the same period the previous year and that net profit sank 47.6 percent to ¥493.47 billion.
While the domestic car market has been shrinking for some time, the markets in the United States — the world’s biggest — and Europe took a direct hit from the global credit crunch, with U.S. sales for April-September slipping to 1.4 million units from 1.5 million a year ago.
In Europe, sales fell to 579,000 units from 635,000. The Western European markets are worsening, while sales in Russia and other Eastern European markets remained firm, Kinoshita said.
Meanwhile, sales in other parts of Asia, South America and the Middle East increased, he said.
As a whole, the group global sales for the same period fell to 4.2 million units for the April-September period, from 4.3 million units a year earlier.
Toyota, Honda cuts
The U.S. credit market turbulence is weighing on the production and employment plans of major carmakers like Toyota Motor Corp. and Honda Motor Co. at home and abroad, company officials said Thursday.
Toyota Motor Kyushu Inc. will not rehire 500 temporary employees for a factory manufacturing a range of luxury Lexus models, officials at the Miyawaka, Fukuoka Prefecture-based firm said.
When Toyota Motor Kyushu ended employment contracts for the 500 in August in light of shrinking U.S. demand, it was still planning to rehire them at year’s end or later, on the assumption that production activities would soon rebound, they said. But the subsequent rapid deceleration in global economic activity has made it necessary for the company to conduct sharper production cutbacks than it had initially envisioned.
The wholly owned arm of Toyota has been manufacturing such Lexus models as the IS350 and ES350 sedans, as well as the Lexus RX350 sport utility vehicle, known as the Harrier in Japan.
The company posted sales of more than ¥1 trillion in the business year to March 31, with output for the 12-month period coming to 440,000 units.
But sales in the U.S. market, which imports 60 percent of the firm’s output, have been in the doldrums, forcing it to lay off a combined 800 temp workers at two installations in June and August. Although it had planned to rehire 500 of the 800 temps, anemic demand in the United States has forced it to abandon the plan, they said.
Honda President Takeo Fukui said the same day the firm may have to curb output at its plant in Sayama, Saitama Prefecture, in the second half.