It's not only the Big Three of American auto that are facing tough times in this economic slowdown. Japanese automaker Toyota will lose money in its core auto manufacturing business for the first time in 70 years this fiscal year, the company said Monday, in a sign of how the global economic crisis is hurting even the mightiest carmakers.
Toyota forecasts a loss of 150 billion yen ($1.7 billion), for the fiscal year ending 31 March, compared to its earlier forecast of 600 billion yen operating profit.
Toyota said the dismal forecasts came "in response to the unexpected degree of the slowdown in the automotive market, and the revision of the assumed exchange rates in response to further appreciation of the yen." The automaker cut its net income to 50 billion yen, down 91 per cent from its earlier estimate of a 550 billion yen net profit.
The Japanese auto giant, which has been neck and neck with General Motors to be the world's largest vehicle-maker, said it still expected to eke out a narrow group net profit for the year. But the company, which just a few months ago appeared to be riding above the ills that have crippled Detroit, said its sales had plunged not only in North America but also in emerging markets.
''The change in the world economy is of a magnitude that comes once every hundred years,'' Toyota's president, Katsuaki Watanabe, told a news conference in Nagoya, Japan, near the company's Toyota City headquarters. Sales last month dropped ''far faster, wider and deeper than expected.'' Calling the current environment ''extremely tough'', he said that the company was ''facing an unprecedented emergency situation'' and admitted that it ''can't see the bottom''.
With some $18.5 billion in cash, and relatively little debt, Toyota is still in far better shape to weather the downturn than GM and Chrysler, which on Friday received a $17.4 billion emergency bailout from Washington. The last time Toyota posted an operating loss was in the year ended March 1938, said spokesman Hideaki Homma.
Still, Toyota's downward revision, its second in two months, underscores how the worst financial crisis since the 1929 Depression has damaged foreign as well as domestic American carmakers. It is also a stunning setback for Toyota, which until recently had seemed unstoppable with eight straight years of record profits.
The carmaker's sales in the US, traditionally its most profitable market, plunged 34 per cent in November. Toyota's European sales dropped 34 per cent last month, according to the European Automobile Manufacturers Association in Brussels.
The company today cut its vehicle sales forecast 8.5 per cent to 7.54 million for the year ending 31 March. It lowered its North America sales estimate by 10 per cent to 2.17 million vehicles. In Europe, sales may total 1.04 million vehicles and at home it may sell 2.01 million.
Automakers worldwide are cutting production as sales plummet. Toyota, which opened its seventh North American auto-assembly plant earlier this month, said it plans to further reduce production at factories in the US and Canada. The automaker this year halted production of Tundra pickups at its San Antonio plant for more than three months. Production resumed in Texas in November with a single shift.
Compounding the drop in demand is the stronger yen, which erodes overseas profits for Japanese automakers. Every 1 yen gain against the dollar and euro trims Toyota's annual operating profit by 40 billion yen and 6 billion yen, according to the company. The carmaker is basing its second-half earnings outlook on 93 yen to the dollar and 123 yen to the euro.