Toyota expects first operating loss in history
Japan's top automaker said it expected an operating loss of 1.69 billion dollars for fiscal 2008, the first loss since it started reporting annual earnings in March 1941.autos Updated: Dec 22, 2008 17:31 IST
Toyota Motor Corp. on Monday forecast its first-ever operating loss this year as the global slowdown creates "an unprecedented crisis" for the long profitable automaker.
Toyota's sharp cuts in forecasts marked a deepening of the woes plaguing the auto industry, which has seen General Motors and Chrysler, two of the US Big Three automakers, on the verge of collapse due to the global financial turmoil.
Toyota, which vies with GM for the crown of the world's largest automaker, said it was cutting back production and investment as a slump in sales and a soaring yen wreak havoc on its balance sheet.
"The company is facing an unprecedented crisis where it cannot avoid posting an operating deficit in this term," Toyota president Katsuaki Watanabe told a news conference at the company's hub in central Japan.
"We will have to build on the company's strengths to ensure profit," he said.
Toyota said it would freeze the launching of a new factory in the US state of Mississippi and scale back production in India.
"The company has decided to either delay or review almost all projects aimed at expanding production ability or building new plants," Watanabe said.
Japan's top automaker said it expected an operating loss of 150 billion yen (1.69 billion dollars) for the financial year, the first loss since it started reporting annual earnings in March 1941.
Toyota said it still expected to make a profit on a net level but cut its forecast sharply to 50 billion yen, down from a previous estimate of 550 billion yen.
The automaker has enjoyed hefty profits in recent years fuelled by demand overseas, particularly in the United States, for its eco-friendly hybrid cars.
Toyota enjoyed operating profit of 2.27 trillion yen in the previous financial year.
But demand has fallen sharply in the United States as a credit crisis at banks drags down the entire economy. The White House on Friday offered a 13.4-billion-dollar government lifeline to keep GM and Chrysler afloat.
Analysts said Toyota's revision showed the global crisis was affecting all automakers, not just Detroit's long troubled Big Three,which also includes Ford.
"It is symbolic for a company like Toyota, representing Japan, to suffer a loss," said Yasuaki Iwamoto, auto analyst at Okasan Securities.
"Not only Toyota but all the carmakers are finding it crucial to get to the bottom of this abnormal market condition," he said.
For the current year, Toyota now expects global sales worth 21.5 trillion yen, down from an earlier estimate of 23.0 trillion yen.
Toyota said group sales are expected to slump to 8.96 million vehicles for the calendar year of 2008, down four percent from a year earlier.
For the first time, Toyota did not announce a sales forecast for the next financial year.
"The markets are changing every week and even every day. Unfortunately we cannot forecast our business performance for the next year at this point," Watanabe said.
"It is extremely difficult to read the conditions of the global markets now."