06 Nov 2008 01:39:40
Toyota hacks forecasts as U.S. carmakers seek help
TOKYO (Reuters) –
Toyota Motor Corp, the world's No.1 automaker, warned operating profits will sink to a 13-year low this year, as other carmakers sought more state help to ride out a financial crisis that is crippling demand and squeezing credit around the globe.
After a week of profit warnings from six of the seven other Japanese car makers, industry watchers had braced for similar pain at Toyota -- until recently the envy of the sector with eight straight years of profit growth.
But a 63 percent cut in forecast operating profit, to 600 billion yen ($6.1 billion), was far beyond the most pessimistic prediction -- and would be Toyota's lowest profit since 1995/96, and down 74 percent from a record 2.2 trillion yen last year.
"I was very much stunned," Koji Endo, an analyst at Credit Suisse. "First-half profit was already more than 580 billion yen, so that means the company is looking at virtually no profit in the second half.
A poll of 17 brokers had forecast 1.34 trillion yen for the year to March 2009.
The maker of the Camry sedan, Prius gas-electric hybrid and Tundra pickup has cut production, let go temporary staff and offered buyers unprecedented incentives as sales in key markets slide due to the spreading global crisis.
But its U.S. rivals are in more dire straits.
General Motors Corp warned this week that the industry's prospects are dwindling fast as a "near collapse" in demand for cars accelerates the pace of cash burn.
The chief executives of Detroit's Big Three -- GM, Ford Motor Co and Chrysler LLC -- are scheduled to lobby House of Representatives Speaker Nancy Pelosi later on Thursday on the need for new and immediate aid, on top of $25 billion in loans sought from the outgoing Bush administration.
GM and Ford are expected to post dismal results on Friday.
Honda Motor Co Chief Executive Takeo Fukui, meanwhile, complained about wild fluctuations in the yen, saying authorities should step in to prevent a sudden rise in the currency -- a major culprit for Japanese car makers' revisions.
Toyota's forecast cuts came as an even bigger shock after a newspaper reported earlier that the figure could merely "fall short" of 1 trillion yen.
The Tokyo Shimbun daily report had sent Toyota shares down 10 percent in Tokyo, before the results were announced. Tokyo's transport sector subindex fell in line and Toyota shares in Frankfurt later slumped 13 percent.
"I had never imagined such a big downward revision on its earnings outlook and a sharp fall in its interim result," said Yasuaki Iwamoto, an analyst at Okasan Securities, predicting a sharp drop in the share price in Tokyo on Friday.
For the year to end-March, Toyota now expects 550 billion yen net profit instead of 1.25 trillion yen -- based on a dollar and euro average of 100 yen and 130 yen assumed for the second half, versus less favourable levels of 98 yen and 127 yen on Thursday.
The impact of a 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 lowered its 2008/09 global sales forecast to 8.24 million vehicles from 8.74 million, expecting weaker demand in most regions.
"In this environment, it's impossible to tell when things will start to improve," Executive Vice President Mitsuo Kinoshita told reporters, adding he hoped the U.S. market would start to recover around the end of next year.
He said Toyota would urgently reduce costs and speed up the roll-out of fuel-efficient hybrids, starting with four new models next 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.
Ford and GM welcomed government efforts on Wednesday to expedite regulations for administering the advanced technology loans. Industry believed two months ago that the financing for more efficiency would be enough to help it fund crucial projects, such as the electric Chevrolet Volt, and help it avoid further turmoil.
But Wall Street's meltdown and the cascading global credit crisis sank debt portfolios of the Detroit manufacturers and choked off consumer borrowing for auto purchases.
"There's widespread recognition that the economic downturn and the credit crunch totally changed the situation and that industry is facing serious difficulties, and there is a need for additional assistance," said Alan Reuther, legislative director for the UAW, the main autoworkers' union.
(Additional reporting by Sachi Izumi and Aiko Hayashi in TOKYO and John Crawley in WASHINGTON, Editing by Lincoln Feast & Ian Geoghegan)
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