Toyota Forecasts 8.68 Billion Dollar Loss, page 1

Toyota forecasts $8.6B loss, says 1 million sales will vanish

May 8, 2009 - 2:31 am ET
UPDATED: 5/8/09 10:06 a.m. ET

TOKYO (Reuters) -- Toyota Motor Corp., the world's biggest automaker, forecast a much bigger-than-expected $8.6 billion loss for its current fiscal year and said it would sell about 1 million fewer vehicles as it scrambles to cut costs amid a severe market downturn.

The global crisis that has battered demand for cars and pushed U.S. rival Chrysler into bankruptcy has hit Toyota hard, reversing its rapid expansion into overcapacity almost overnight. Dozens of its factories stand half idle.

The Japanese giant made the forecast as it posted its first-ever annual consolidated operating loss, for the fiscal year that ended March 31, after a record profit the year before.

In its fourth quarter, Toyota booked a $6.9 billion loss, in line with consensus estimates and greater than the $6 billion net loss posted by General Motors for January-March yesterday. Toyota reduced its annual dividend nearly 30 percent -- the first cut since at least 1994, when it changed its reporting period.

While the entire industry is caught in the slump and seeking to offload cars piled up in stockyards, Toyota has been especially vulnerable due to its exposure to the United States and Japan, where sales have plunged to multi-decade lows.

Even in China, Toyota has bucked the market's rise with a fall so far this year.

"Toyota's outlook was worse than I'd expected. The company expects a really tough time for the first six months," said Naoki Fujiwara, a fund manager at Shinkin Asset Management. "I expect the bottom for the auto industry is the April-June period, followed by a slow recovery."

Toyota President Katsuaki Watanabe was more downbeat, stopping short of predicting when sales would pick up in major markets, or when the company would return to profitability as it remains saddled with excess capacity.

"Of course the external environment doesn't help, but we were lacking in the scope and speed of dealing with various problems and issues, and for that I am sorry," he told a news conference.

For the year to next March, the maker of the Prius hybrid forecast an operating loss of 850 billion yen, more than double the average forecast in a survey of 20 analysts by Thomson Reuters. It sees an annual net loss of 550 billion yen based on the dollar and euro averaging 95 yen and 125 yen.

The bleak forecasts prompted ratings agency Standard & Poor's to downgrade Toyota's long-term debt ratings to AA from AA+, with a negative outlook.

14% sales decline

Toyota said it expected its global sales, including units Daihatsu Motor Co. and Hino Motors Ltd. but excluding cars sold by joint ventures in China, to fall about 14 percent in 2009-2010 to 6.5 million vehicles.

Watanabe said that would knock 800 billion yen off the operating level this year, which Toyota aims to offset with cost cuts. The bigger loss forecast this year is otherwise due to a stronger yen, he said.

To return to profit, Toyota must sell more cars or cut costs further, Watanabe said. But he predicted the U.S. market would be around 10 million vehicles industrywide at best this year, down from 13.2 million in 2008 and 16.2 million the previous year.

Toyota is hoping the launch this year of a third-generation Prius will ease some of its sales slide and production cuts, even though it is cutting the price of the popular model to bring it closer to Honda's new Insight hybrid, meaning its contribution to profits would be smaller than planned.

Toyota may also benefit from the expected introduction of a "cash-for-clunkers" sales incentive in Japan.

Capital spending slashed

Toyota is bleeding overhead costs, with about a third of its global assembly lines working on single shifts. It will slash capital spending by more than a third this year to 830 billion yen as it puts expansion projects on hold, but it said it was not thinking of closing any production lines for good.

Toyota reported a January-March net loss of 765.8 billion yen, against a year-earlier profit of 316.8 billion yen.

Domestic rival Honda Motor Co. last week forecast a small profit for this year thanks to its relatively healthy motorcycle business.

"Compared with Honda, (Toyota) has a lot of larger models and a lot of excess capacity globally," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. "By 2010, cost cutting and capacity reduction may be taking effect, so they could break even then."

Japan's Fuji Heavy Industries Ltd., in which Toyota has a 16.5 percent stake, forecast its annual operating loss could balloon to 35 billion yen this year from 5.8 billion yen in 2008-2009, citing weak global car sales.

Automotive News

I thought some of those people who are certain that the Automotive Retail Industries woes are simply relegated to the American Car Manufacturers as a result of American inability to manufacture desirable cars, or because of Union Labor adding too much to the cost of those cars.

The same thing that is hurting Toyota as it forecasts these staggering costs and factories having to be idled 50% of the time is the same thing driving American Car Manufactures into bankruptcy and pending bankruptcies…the frozen credit markets have all but eliminated most purchasers from the market place as banks not only tighten their credit standards but often won’t loan to customers with exemplary credit and income.

The demand and desire is still there for the most part as Toyota predicts it will sell one million less vehicles this year. The money to borrow to buy them simply isn’t.

While lingering perceptions from Detroit’s struggle to reinvent itself in the 70’s and 80’s still haunt the Big Three American Auto Makers, and palpable resentments exist towards the United Auto Workers because of some of their political policies and a proven tenacity to hold on to living wages while most Americans have long resigned themselves to indentured servitude by working for less than they need to make ends meet and tapping in to easily obtained Credit Lines to finance the rest. Detroit had by 1991 give or take a few flops since in a highly competitive business delivered cars that dollar for dollar provide more power, safety, styling and often fuel economy while most American shoppers flock to Toyota and Honda Showrooms without even researching or test driving an American counter part. They truly believe it’s the right decision for them, but is it really the right decision for them to reject out of hand the products manufactured in America that provide during normal times 1 out of 7 Americans a job between the manufacturing, shipping, advertising, parts outsourcing, service and sales of automobiles?

The very first big industry to be exported from the United States was steel, by 1970 most of Pittsburgh’s and Cleveland’s once thriving Steel Mills had been shuddered and abandoned, there well paid Union Workers laid off permanently.

Where did the Steel Industry go? It went to Japan.

In 1972 and again in 1974 back to back oil embargos by Arab Nations protesting the United States foreign policy regarding Israel sent the cost of cheap gas skyrocketing and many budget conscious and thrifty Americans began investigating the small little 4 cylinder Hondas, Toyotas and Datsuns that there was so little demand for there were hardly any showrooms in America or inventory of them.

As the first few hit the streets surpassing by far an away the gas mileage the American road hogs of the day got, interest and demand sky rocketed.

The number one ingredient needed to make a car? Steel, the number one manufacturer of Steel at that time? Japan, thanks to the shuttering of the Steel Industry in America that would soon lead to the Rust Belt.
About that same time the Teamsters found themselves under attack by the Justice Department.

The regulated Airlines became deregulated with intense jockeying for new routes and hubs resulting eventually in the bankruptcies of such giants as Pan Am and TWA the nations first airlines, breaking and crippling their unions in the process. Braniff, Eastern, Continental would all be in bankruptcy soon, further destroying the Unions that once provided Americans a real living wage that required no easy credit to supplement them.

A swarm of cheap immigrant labor from south of the border would soon leave the strawberry fields and orange groves they were once relegated too, to head with a wink and a nod to Construction and Electrician and Factory Jobs. Willing to work for lesser wages the AFL-CIO was soon on the ropes too. Amazingly as the illegal immigrant labor population began to find easy employment in fields once dominated by Real Living Wage skilled workers that made the United Farm Workers a weakened organization as well.

Americans now rapidly becoming retrained not to buy American products, or support Unions or honor their picket lines, everything from kid’s toys, to tools and electronics began being manufactured abroad. Textiles being produced in Asia would soon shudder the mills in New England and the Carolinas. Furniture being made in Asia would do the same.

Wages for most people didn’t go up, they went down, unless you were a highly skilled professional, executive, lawyer, banker or doctor or in retail sales.

Before long all of our products being made and coming from overseas, it seemed to only make sense that the customer service representatives answering inquiries and complaints and needing consumer help be overseas too!

It would be alright, we had a virtual economy now. Americans watching prices go up and their paychecks go down flocked to mega retailers like Wal-Mart to save a buck or two, forcing mom and pop stores across the nation out of business, while Wal-Mart started applying pressure to the few big manufacturers of household goods left in the United States. Deliver them to us for less or we won’t stock them, and the people who once would for you are all out of business. Those companies too like Lawnboy had no choice but to export their manufacturing overseas.

Somehow most of us thought it would be alright, we were just getting a better deal or a better product the smart thing to do.

Well here we are folks, with unemployment continuing to rapidly rise, jobs harder and harder to come by, nearly bankrupt save for a Federal Reserve that will print up money as fast as the presses can print it to hand it to the Banks because they need it to start lending again.

Anyone getting the picture yet? We did it to ourselves, enjoy your Toyota! You might want to sell off your stock in them though!