Toyota: Biggest Profit Drop in a Decade
November 06, 2008
By Michelle Krebs
You know things are bad when seemingly invincible Toyota is struggling, and it is.
Calling the current economic environment "unprecedented," Toyota reported Thursday its quarterly profit plunged 69 percent, mainly due to slumping vehicle sales in the U.S. and Europe, where Toyota lost money, as well as depreciation of the yen versus the U.S. dollar.
Toyota's earnings drop was far more dramatic than analysts had anticipated and prompted Toyota executives to severely downgrade its profit forecast for the year. Earlier, Honda and Nissan announced larger-than-expected profit declines. Toyota President Katsauaki Watanabe Thursday predicted the automaker, when it posts its financial report when its fiscal year ends March 31, 2009, will report its smallest annual profit since 1999.
Toyota also lowered its forecast for full-year vehicle sales globally by nearly 6 percent or 673,000 vehicles, to 8.24 million vehicles from 8.74 million. The automaker is reviewing its previous goal of selling 9.7 million vehicles in calendar-year 2009.
In the U.S., where Toyota curtailed production at two plants to take down inventories of its Tundra pickup and Sequoia SUV, Toyota lost money -- about $350 million -- in the first half of its fiscal year. Toyota also lost money in Europe.
Toyota's Emergency Response
In response to the deeper-than-expected profit decline, Toyota immediately established an "emergency profit improvement committee" headed by Watanabe to look at ways to cut costs and maximize profits.
Toyota will cut costs across the board. Included will be slicing in half the number of contract workers in Japan from the current 6,000 to 3,000 by March, reviewing capital expenditures, reconsider the timing and scale of projects and review capital expenditures.
At the same time, Toyota aims to increase vehicle sales and profits by launching new models, such as the iQ in Europe and new hybrid vehicles. In the U.S., despite the struggles, Toyota has gained market share in the U.S., where its share of industry sales reached a record high of 17 percent for the first half of its fiscal year due to strong sales of the Yaris and Corolla.
The automaker plans to "stimulate market demand with special models and revised pricing strategies by region and by models," company executives said in a conference call Thursday with financial analysts and media.
In that call, Takahiko Ijichi, senior managing director of Toyota Motor Corp., said the total pot of incentive spending in North America likely won't increase but will be redistributed. Instead of plunking most of the incentive funds on big vehicles like the Toyota Tundra and Sequoia as the automaker has most of this year, it will shift that spending to other models now that once-bloated inventories of trucks and SUVs are more in line with demand.
Posted by Michelle Krebs at 8:32 AM under Business , Featured , Toyota | Comments (0) | digg this | Seed Newsvine
Leave a comment