Toyota reports worst-ever annual loss
Toyota is reporting a $4.41 billion US net loss for the fiscal year through March, a larger loss than it had forecast and its worst result in company history.
The outlook in the future is even grimmer — the world's biggest automaker projects that net losses will deepen to $5.53 billion for the fiscal year through March 2010.
Katsuaki Watanabe, president of the world's largest automaker, said the devastating results were caused by "the significant deterioration in vehicle sales particularly in the U.S. and Europe," the strong yen and the rising cost of raw materials.
It was Toyota's first annual net loss since 1950.
The company also reported a $7.7 billion net loss for the January-March quarter. The quarterly loss was bigger than the full-year loss because Toyota had some positive quarters earlier in the fiscal year.
The maker of the Prius hybrid and Lexus luxury models had forecast a $3.51 billion net loss for the just-ended fiscal year, and analysts surveyed by Thomson Reuters had expected Toyota's net loss to total about $3.75 billion.
American competitors worse off
For the January-March period in 2008 — back when the Japanese automaker's sales were booming — Toyota had recorded a net profit of $3.19 billion. It had racked up a record profit of $17.3 billion the previous fiscal year, riding on its reputation for quality and good mileage.
Toyota's business has been hit hard by the U.S. financial crisis and credit crunch, which sent ripple effects around the world. Although it is in far better health than American rivals General Motors Corp. and Chrysler LLC, its annual sales plunged 21.9 per cent to $206.4 billion for the fiscal year. In the year ahead, it sees sales sliding 19.6 per cent to $166 billion.
But Robert Wiseman, professor of business at Michigan State University in East Lansing, said Toyota should emerge in good shape in the long run, and can even hope to benefit from a decrease in price competition in the U.S. as rivals weaken.
"Toyota continues to have a very strong positive brand reputation among North American buyers," Wiseman said. "I would expect all global car manufactures to report a loss this fiscal year since car sales are way down."
In the key industrialized markets — U.S., Europe and Japan — overall market demand has dwindled over the past year by 20 per cent to 30 per cent.
Turnaround expected to take time
Toyota has been slashing managerial pay and offering buyouts to thousands of its U.S. workers. It reduced the number of temporary workers in Japan from 9,200 last year to 3,000.
But a turnaround is likely to take time, analysts say.
Toyota said Friday it expects its operating loss — which reflects its core automaking business — to grow to $8.57 billion for the year through March 2010, from $4.65 billion this past year.
"It appears to take some more time before the financial markets in the U.S. and Europe normalize and the global economy recovers," Watanabe said
Toyota's vehicle sales for the fiscal year ended March 31 fell 15.1 per cent to 7.57 million vehicles from 8.91 million vehicles the previous year. It expects to sell even fewer vehicles in the fiscal year through March 2010 — 6.5 million vehicles.
For the fiscal year, Toyota's sales in Japan sank 11.1 per cent to 1.95 million vehicles. But it still managed to raise its Japanese market share to a record 46 per cent. Its North American annual sales tumbled 25 per cent to 2.21 million vehicles.
Future in small cars, hybrids
Wiseman, the MSU professor, says Toyota should prepare for an eventual recovery.
"What Toyota can do as it waits for the economy to turn around is invest in the next generation of vehicles and work on improving quality control in its production facilities," he said.
Watanabe promised Friday more cost reduction and a focus on hybrids and compact vehicles to boost profitability. Toyota will work on ecological technology such as hybrids and plug-in vehicles toward long-term recovery, Watanabe said.
Toyota is unveiling the remodeled, third-generation Prius hybrid, one of its flagship models, later this month. But it is expected to face intense competition in the green technology market with Japanese rival Honda Motor Co., which has already launched a cheaper 2010 Insight model.
Yasuaki Iwamoto, auto analyst with Okasan Securities Co. in Tokyo, said Toyota must wait for overall industry woes to settle, but also must work on cut costs and develop cheap small cars.
"It must keep working on small cars to build toward the future," he said.