Toyota Warns on Profit again, Cuts Investment

Toyota Motor, the world's biggest automaker, on Monday forecast its first ever group operating loss due to a relentless global slide in car sales and a crippling rise in the yen.

David Zalubowski / AP Toyota.

Toyota had been expected to issue its second profit warning in less than seven weeks, after domestic rival Honda Motor Co also took the rare step of altering its guidance outside the usual quarterly reporting season, but the downward revision was bigger than predicted.

"This is very, very, very bad," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

"There's a chance they could fall into the red in the next business year as well. This is also not just a problem for Toyota. What is good for Toyota is good for the Japanese economy."

Automakers around the world face their toughest business environment in recent memory, caught in a sharp reversal of demand as the financial crisis spread globally, squeezing credit and consumer sentiment.

Toyota, one of the fastest-growing major automakers until last year, has been particularly vulnerable after it rushed to add production capacity that quickly became redundant.

Toyota has idled factories, slowed assembly lines and delayed manufacturing projects, such as the start of a new Mississippi plant under construction to build the Prius hybrid model.

Record Loss

Toyota cut its group operating forecast to a loss of 150 billion yen ($1.7 billion) for the year to end-March, after shocking financial markets last month by slashing its group operating profit forecast by 1 trillion yen to 600 billion yen.

It made a record operating profit of 2.27 trillion yen last year.

Analyst forecasts on Reuters Estimates ranged from a loss of 150 billion yen at the low end, to a profit of 800 billion yen for figures not updated since conditions deteriorated in the past month.

Toyota now expects group net profit of 50 billion yen instead of 550 billion yen.

Toyota made the announcement at its annual year-end news conference attended by its top executives.

Honda made a similar move last week, cutting its annual profit forecast by 67 percent, and outlined a list of counter-measures such as putting off non-urgent investments to prop up its profitability.

In the United States, automakers are in even bigger trouble, with President George W. Bush throwing General Motors and Chrysler a lifeline of up to $17.4 billion to stave off bankruptcy.

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Departing from past practice, Toyota did not disclose its sales and production forecasts for the coming calendar year.

In August, it cut its group-wide global sales forecast for 2009 by 7 percent to 9.7 million vehicles, but that is largely expected to fall short by as much as 1 million vehicles.The figures include sales at subsidiaries Hino Motors and Daihatsu Motor.

The company lowered its 2008/2009 vehicle sales forecast to 7.54 million vehicles from 8.24 million. It sold 8.913 million vehicles in the last year.

Toyota also lowered its dollar assumption for the remainder of the year to 90 yen and its euro assumption to 120 yen. The company's president said Toyota was undecided on its dividend policy.

Toyota shares closed down 0.2 percent ahead of the announcement in a firmer Tokyo market.

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