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Toyota Profits Tumble 28%

Weak U.S. economy, stronger yen and increasing costs to blame

Toyota Motor Corp. on August 7 reported a 28% slide in first-quarter net profits as a weak U.S. economy, a stronger yen and rising costs put the brakes on its recent rapid growth.

Toyota did not deliver the profit warning that markets had feared, but kept its forecast for the first decline in annual earnings in nine years.

Japan's top automaker, a pioneer of petrol-electric hybrid vehicles, said net profit came to 353.66 billion yen (US$3.2 billion) in the three months to June, dropping for a second straight quarter.

Operating profit tumbled 38.9% to 412.59 billion yen as revenue declined 4.7% to about 6.22 trillion yen.

Toyota executive vice president Mitsuo Kinoshita described the results as "severe," blaming a rapidly changing business environment including a weak U.S. dollar and soaring raw material prices. He said it would be tough for the automaker to achieve its goal of selling 10.4 million vehicles in 2009, which if met would make it the first company in the world to sell more than 10 million vehicles in one year. Toyota recently cut its global sales target for 2008 to 9.5 million vehicles from 9.85 million.

"Soaring material costs and oil prices are of course severe factors for the entire auto industry. But when you think of Toyota's strengths, it should not be as badly affected as other major automakers," Odaira said.

Toyota sold 2.19 million vehicles in the first quarter, a tepid increase of just 1.1% from a year earlier.

"Sales declined in North America and Europe, particularly western Europe. However, resource rich countries in Asia, Middle and South America and the Middle East showed good demand," said Kinoshita.

Sales fell 9.6% in Europe to 301,000 vehicles and by 4.3% in North America to 729,000 as an economic slowdown and soaring prices at the pump hit consumer spending and put drivers off bigger, fuel-guzzling cars and trucks.

"Currently the sales in North America are in a slump. However, we still see the market growing potentially in the mid- and long-term," the Toyota official said.

Toyota is now stepping up its focus on emerging markets such as China, India, Russia and Brazil to offset weakness in developed markets, while shifting production in the U.S. towards smaller cars and hybrid vehicles.

Copyright Agence France-Presse, 2008

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