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Toyota's Profits Drop 48%

Company expects annual profits to plunge to lowest level in 9 years

Toyota Motor Co. said on Nov. 6 annual profits are expected to plunge more than two-thirds to the lowest level in nine years, warning the global auto industry faced an "unprecedented" crisis. The company now expects earnings of 550 billion yen (US$5.6 billion) in the current year to March, down from the 1.25 trillion yen previously projected. That would mark a decline of 68% from the previous year -- the first drop in Toyota's annual earnings in nine years.

"The severity of the current situation is like nothing we have seen before," Toyota executive vice president Mitsuo Kinoshita said. "The global financial crisis has affected the real economy, and the auto markets, particularly in developed countries, are suddenly decelerating."

Toyota said its first-half earnings tumbled 48% to 493.47 billion yen due to a stronger yen and weak global economy. Operating earnings fell 54.2% to 582.07 billion yen as revenue dropped 6.3% to 12.19 trillion.

"This is an unprecedented situation. It is difficult to predict where this will end," Kinoshita said.

In North America, the epicenter of the global credit crunch, Toyota lost 34.6 billion yen. Profits in Europe plunged. Toyota said its top managers were reviewing its expansion plans in light of the slump.

"Planned factories, existing facilities, new projects; they are reviewing all of them," said Kinoshita. "Capital investment will be lowered significantly. We are reviewing all of our costs and examining ways to maximise sales," he said.

The auto giant recently announced a plan to expand investment in India, where automobile sales are forecast to rise sharply as the economy expands and middle-class incomes rise.

It also said earlier that it was planning to resume operations of three factories in the U.S. after a three-month suspension for exports for growing Middle Eastern and Latin American markets, despite slower US sales.

Toyota sold 4.25 million vehicles globally in the first half, 51,000 fewer than a year earlier.

Copyright Agence France-Presse, 2008

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