Toyota Dives as Trade Resumes After Profit Warning

Shares in Toyota Motor tumbled down 12.6 percent when its stock resumed trade on Friday after the world's biggest automaker shocked investors with a warning that profits this year would hit a 13-year low.

David Zalubowski / AP Toyota.

Toyota was untraded with sell orders at 3,310 yen in the morning, after falling 16.5 percent on Wall Street amid big problems for American automakers who are lobbying for government assistance as sales slide.

The broader market declined sharply on Toyota's surprise outlook cut, with many likening it to the "Sony shock" in April 2003, when a huge quarterly loss by Sony sparked a two-day sell-off.

But some investors said the situation was even worse for Toyota, given the deterioration in the global economy.

"The Sony shock came when the overall economy was on the rise, so it was taken as the end of the bad news, but this time, it is in the middle of an economic slowdown," said Tomomi Yamashita, fund manager of Shinkin Asset Management.

"Compared with the Sony shock, it will probably take Toyota's share price longer to return to a solid recovery path," he said.

In Tokyo, Toyota shares fell 10 percent on Thursday ahead of the profit warning after a newspaper reported that its operating profit could fall below 1 trillion yen ($10 billion) in the year to March 2009, less than half the profit seen last year.

But the damage was much greater, with Toyota announcing after the Tokyo market close that it expected an annual operating profit of 600 billion yen -- the lowest since 1995/96 and down 60 percent from its previous forecast.

For the year to March 31, the world's biggest automaker now expects operating profit of 600 billion yen ($6.1 billion) versus a previous forecast of 1.6 trillion yen. A poll of 17 brokerages had forecast 1.34 trillion yen.

The maker of the Camry sedan, Prius gas-electric hybrid and Tundra pickup truck now expects net profit of 550 billion yen instead of 1.25 trillion yen.

Toyota , until recently the envy of the industry with eight straight years of profit growth, has had to put factories on hold, release temporary staff and offer buyers unprecedented incentives as sales in the crucial U.S. market slumped further than it expected.

With two months remaining this year, Toyota's U.S. sales are down 12 percent to date, forcing it to lower its forecast there this week for the second time in four months.

Toyota's July-September operating profit fell 72 percent to 169.5 billion yen, while net profit sank 69 percent to 139.8 billion yen.  Shares in Toyota have lost 37 percent in the year to date, better than the 43 percent decline in Tokyo's transport sub-index.

The company reported a record 2.27 trillion yen profit last year, but the industry's woes have seen its shares slide by a third this year, to 3,870 on Thursday -- in line with a similar fall in Tokyo's transport sector subindex.

The Tokyo Shimbun reported last month that Toyota's operating profit would be 1-1.2 trillion yen, but said growing woes in the sector would mean a further downgrade to below 1 trillion yen ($10 billion).

     
U.S. Blues

Toyota, the maker of the Camry sedan, Prius gas-electric hybrid and Tundra pickup truck, has previously forecast a 30 percent fall in operating profit to 1.6 trillion yen this year.

Toyota's U.S. sales have fallen 12 percent so far this year, prompting the top Japanese automaker to lower its forecast there this week -- the second cut in four months.

Its October U.S. sales slid 26 percent from last year, while its non-minicar sales in Japan fell 13 percent.

Detroit's General Motors , Ford Motor and Chrysler LLC are faring worse, suffering sharper sales drops and struggling to return to profit.
The slump is also prompting talk of mergers between GM and Chrysler as sales plunge and they face deep losses.

The impact of the global credit crisis has spread to emerging markets such as China and India, throwing a wrench in automakers' plans to seek strong growth there to offset slumping sales in the big U.S. and European markets.

Toyota's announcement will complete a brutal earnings season for Japanese carmakers. Of the eight, only Fuji Heavy Industries did not lower its annual forecasts. Nissan Motor shocked investors last week by more than halving its operating profit forecast.

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Toyota has lost $77 billion in market capitalization this year, ceding its long-held post as the world's most valuable carmaker to Volkswagen, which has gained on Porsche's plan to buy more than three-quarters of the German car maker.

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