Toyota Motor Corp. will slash domestic production 54 percent in the current quarter as demand plunges in the U.S. and Japan.

The company's output, excluding its Daihatsu Motor Co. and Hino Motors Ltd. units, will drop to about 519,000 vehicles in the three months ending in March, compared with 1.13 million a year ago, according to figures derived from Toyota's latest full-year forecast.

Toyota spokesman Paul Nolasco declined to confirm the figures.

The worst U.S. car market in 28 years is forcing Toyota to widen production cuts after it slashed domestic output 23 percent in the third quarter. The plunge in car production at the huge company is contributing to Japan's sharpest economic contraction since the 1974 oil crisis.

"This kind of drop is unprecedented, probably since the end of World War II," said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, which manages about $3.1 billion. "This is terrible."

Production dropped just 8 percent in the first nine months of the fiscal year. Toyota's domestic production this year will be about 864,000 units fewer than in 2007. The shortfall in the fourth quarter accounts for 71 percent of the full-year reduction.

General Motors Corp., the biggest U.S. carmaker, forecasts industrywide vehicle sales in that country may hit a 27-year low of 10.5 million units.

Toyota is suspending some domestic production for 11 days this month and in March and will eliminate 3,000 temporary workers in Japan by March 31. Toyota said Feb. 6 its operating loss may total ¥450 billion this fiscal year, three times an estimate announced less than two months earlier.

"Operating at 50 percent of factory capacity can't yield a profit," said Koji Endo, a Credit Suisse Group AG auto analyst in Tokyo. "Toyota wants to complete inventory adjustments by April, but with demand so weak, it may actually take until early May."

Producing at 70 percent to 75 percent of capacity is the break-even point, he said.

Industrywide vehicle sales in Japan had their sharpest fall in 35 years last month. Toyota's fourth-quarter overseas production will drop 45 percent to 623,000 units, based on the company's full year forecast.