Toyota sees first annual net loss since 1950

Toyota forecast its first annual net loss since 1950 on Friday as plunging demand for cars, especially in the U.S., and the strong yen pummeled earnings at the world’s No. 1 automaker.

Toyota Motor Corp. Executive Vice President Mitsuo Kinoshita speaks during a press conference to announce Toyota's third quarter financial results in Tokyo on Friday. Toyota sank into the red for the October-December quarter and acknowledged it was heading for its first annual net loss since 1950 because of plunging global automobile sales and the strong yen. Joining a string of Japanese companies that have slashed forecasts

TOKYO — Toyota forecast its first annual net loss since 1950 on Friday as plunging demand for cars, especially in the U.S., and the strong yen pummeled earnings at the world’s No. 1 automaker.

Toyota Motor Corp. reported a 164.7 billion yen, or US$1.8 billion, loss for the October-December quarter, down sharply from the 458.6 billion yen profit for the same period the previous year.

Quarterly sales plunged 28.4 per cent to 4.8 trillion yen.

Joining a string of Japanese companies that are now expecting to slide into the red for the year, Toyota said it expects a net loss of 350 billion yen ($3.85 billion) for the fiscal year through March — a stunning reversal from the record 1.72 trillion yen profit it posted the previous year.

In December, Toyota, maker of the Prius hybrid and Camry sedan, thought it would eke out a small annual net profit, but the outlook has darkened since then, particularly as the U.S. auto market has collapsed.

“Toyota is having serious problems responding,” said Yasuaki Iwamoto, analyst with Okasan Securities Co. in Tokyo. “It boasts a full and global lineup of products. But the world’s auto demand changed in a flash.”

Since the company can’t count on global sales picking up next fiscal year, at best it can aim to cut costs to minimize the damage, Iwamoto said.

The last time Toyota had the equivalent of a net loss was in 1950, when it reported just parent results under different accounting standards than it uses now. It has not had a quarterly net loss since it began reporting quarterly numbers in 2002.

Toyota, which last year overtook General Motors Corp. (NYSE:GM) to become the world’s best-selling auto company, is shutting down production at its 11 plants in Japan for 14 days during the first three months of this year, and further such suspensions may be needed.

The company announced no further job cuts Friday. It has said it plans to reduce the number of contract workers — who lack most of the benefits given to regular salaried workers, as well as the tacit guarantee of lifetime employment — from 8,800 in June last year to 3,000 in March.

The rapid rise of the yen against the dollar, euro and other currencies, which reduces the value of overseas earnings, also hurt results.

Executive vice-president Mitsuo Kinoshita promised Toyota will turn itself around through cost cuts and new products. He said Toyota continues to be committed to developing gas-electric hybrids as a pillar of its growth strategy.

“By taking these measures, we will overcome the current crisis and evolve into a company with a higher level of efficiency and resilience,” Kinoshita said.

Last month, the company tapped as incoming president a member of the founding family, Akio Toyoda, an executive vice president who at 52 is considered young by Japanese standards for heading a major corporation.

Toyota officials and analysts say he can help bring employee ranks, group companies and dealerships together during hard times because he has the special charm of a Toyoda.

Just a few hours before the earnings were released, Moody’s Investors Service lowered its top credit rating of “Aaa” on Toyota by one notch to “Aa1,” citing fears about its profitability.

Toyota’s global vehicle sales for the October-December quarter shrank by 443,000 from the same period a year earlier to 1.84 million as sales dropped throughout the world, including North America, Europe, Japan and other Asian nations, it said.

The dramatic contraction in the American vehicle market has been particularly painful. In January, Toyota’s U.S. sales dropped 32 per cent amid a 37 per cent contraction in the overall U.S. market.

Toyota lowered its global vehicle sales forecast for the fiscal year by 220,000 from its December forecast to 7.32 million. It now expects 21 trillion yen in annual sales, down from a record 26.3 trillion yen the previous year.

The company also said its yearly operating loss will balloon to 450 billion yen, worse than its earlier forecast of a 150 billion yen loss. That would be the company’s first operating loss in 70 years. Operating income excludes taxes and other items included in net profit, and often gives a picture of a company’s core business.

Until the U.S. financial crisis erupted last year, Toyota had been on a roll, boosting profits each year for seven straight years, riding on the success of its fuel-efficient models.

Other big Japanese exporters are suffering, too. Electronics makers Sony Corp. and Panasonic Corp. are both forecasting losses for the fiscal year through March.

Honda Motor Co., Japan’s second-biggest automaker, expects to stay in the black for the year through March with a 80 billion yen profit, although that’s down 87 per cent from a record 600 billion yen profit the previous year.

Nissan Motor Co., Japan’s No. 3 automaker, reports earnings Monday. Smaller automakers Mitsubishi Motors Corp. and Mazda Motor Corp. have already projected losses for the fiscal year.

Toyota shares rose 1.6 per cent to 3,050 yen. Toyota announced earnings after trading ended in Tokyo.

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