Toyota Predicts First Fall in Output in 7 Years

Toyota Motor on Monday cut its 2008 groupwide global sales forecast by 350,000 units to 9.5
million vehicles due to a pronounced downturn in the U.S. market, in a rare setback for the world's biggest automaker.

The weaker sales outlook also means global production at the parent company would fall 1 percent from 2007 to 8.43 million vehicles, marking the first decline in seven years.

Toyota's revision underscores an ever-toughening environment for global automakers faced with falling demand for cars, especially higher-margin, bigger vehicles amid rising gasoline pump prices.

Profits are already under severe pressure as prices of steel and other raw materials continue to climb, while tightening environmental regulations raise the cost of research and development.

Analysts said the sales revision was expected after a weak performance in the year to date, particularly in the U.S., but one raised concerns about a possible profit warning when Toyota announces its April-June results on Aug. 7.

"Toyota typically doesn't alter its forecasts at the first quarter, but after a revision of this scope there's always an off chance that they'll lower their earnings outlook," said Credit Suisse auto analyst Koji Endo.

Toyota's initial global sales plan called for sales at the group, which includes truck unit Hino Motors and minivehicle maker Daihatsu Motor o grow 5 percent to 9.85 million vehicles this year. Overall sales forecasts did not change at Hino and fell only 10,000 units at Daihatsu. Toyota was responsible for the rest of the undershoot.

Global sales are now expected to rise just 1 percent, likely keeping Toyota ahead of General Motors as the world's biggest carmaker.

Trouble in the U.S.

Hit by a demand meltdown for pickup trucks and large sport utility vehicles in the United States, Toyota cut its parent-only sales forecast there to 2.44 million vehicles from the 2.64
million it announced in December. The new projection would represent a 7 percent fall from 2007.

Industrywide U.S. vehicle demand has taken a sharp turn for the worse in the second quarter of this year, prompting many automakers and forecasters to revise their 2008 sales outlook by
around 1 million vehicles compared with even some of the more sober views at the beginning of the year.

To respond to fast-changing consumer needs, Toyota this month announced a major overhaul of its U.S. manufacturing plans to shift to more fuel-efficient cars. It now plans to build its Prius hybrid at a factory under construction in Mississippi from 2010, instead of the Highlander SUV. Toyota will also suspend production of slow-selling big trucks in the United States for three months.

The weak U.S. market, which many now expect will total closer to 14 million vehicles this year, down from 16.1 million in 2007, has forced Toyota's rivals in Detroit into worse scenarios of factory closures and job cuts.

Toyota, which is also the world's most profitable carmaker, cut its sales forecast in Europe to 1.19 million vehicles from 1.27 million, and in Latin America to 380,000 from 420,000.

It cut its Japanese sales forecast by 50,000 units to 1.55 million, and sales for the rest of Asia by 60,000 units to 1.52 million vehicles. The sales forecast for China was left at 700,000 units, which would mark 40 percent growth from 2007.

The only region to see an upward revision was the Middle East, where sales are expected to total 590,000 units instead of 510,000, for an expansion of 23 percent.

Toyota's shares ended down 1.2 percent at 4,880 yen in Tokyo before the news.

A poll of 18 brokerages by Reuters Estimates puts Toyota's net profit for the year to next March at 1.38 trillion yen ($12.80 billion), down 20 percent from 2007/08. Toyota's own forecast is for a 27 percent drop to 1.25 trillion yen.