Toyota nine month profits quadruple, yen weighs

February 8, 2011
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, TOKYO, Feb 8, 2011 – Japan\’s Toyota said Tuesday its net profit for the nine months to December nearly quadrupled and upped its outlook despite a damaging crisis involving millions of recalls, lawsuits and record fines.

However, the maker of the popular Prius hybrid saw a 39 percent fall in third quarter net profit year-on-year as sales slipped and operating profit tumbled at a time when the yen hit 15-year highs versus the dollar.

Previously lauded for its safety, Toyota became mired in crisis when it recalled nearly nine million autos between late 2009 and February last year due to brake and accelerator defects alleged to have caused dozens of deaths.

The crisis dealt a huge blow to the firm\’s reputation, prompting predictions it would lose market share as it tightened its recall policy to encompass around 16 million vehicles between late 2009 and January this year.

But despite a plunge in third quarter profits, Toyota joined rival Honda in predicting a brighter picture for the year as a whole thanks to strong demand in emerging markets.

Net profit for the nine months to December soared 293.7 percent to 382.7 billion yen and the car giant raised its annual net profit forecast to 490 billion yen ($5.95 billion) from an earlier 350 billion yen.

"I think half of the wounds (from the recalls) have been healed," senior managing director Takahiko Ijichi told reporters, adding that cost cuts and efforts to improve profitability were bearing fruit.

"We are achieving large profit gains and are on a steady recovery path by more than offsetting the negative effects of the rapid rise of the yen," he said.

However, Toyota saw its third quarter net profit fall to 93.6 billion yen from 153.2 billion yen a year earlier, a result that nevertheless beat expectations of an 89.7 billion yen profit, according to a Nikkei poll of analysts.

In the three months ended December, sales fell nearly 12 percent to 4.6 trillion yen while operating profit tumbled 48 percent to 99 billion as a stronger yen made its exports vulnerable.

Japan\’s automakers have returned to profitability since the financial crisis but a pick-up in demand has been overshadowed by the impact of the strong yen, making their products more expensive overseas and eroding profits.

The expiry of Japanese government subsidies to encourage consumers to buy more environmentally friendly cars in September last year has also weighed on the nation\’s automakers, hitting domestic demand in the second half.

The latest figures come as Toyota\’s position as the world\’s biggest carmaker is under increasing threat from a resurgent General Motors after a huge wave of recalls tarnished its reputation.

In 2008 Toyota ended General Motors\’ 77-year reign as the world\’s largest automaker but the road has been a bumpy one for the Japanese giant as it faces the impact of the economic crisis, recalls and recently a strong yen.

Analysts say the automaker is under pressure to regain consumer trust overseas, particularly in the United States — its second largest market by volume — where it has lost market share to rivals even as overall sales recovered.

But Toyota\’s Ijichi said the automaker was recovering.

"As we see our sales share is not falling much but is staying at 14-15 percent, I think half of the wounds has been healed," Ijichi said.

The automaker last month said it will recall 1.7 million vehicles worldwide over concerns about possible fuel leakages — the latest setback for the troubled auto giant.

The US government plans to release the findings Tuesday of its investigation into reports of sudden acceleration problems in Toyota vehicles, completing a 10-month review into the issues that prompted the millions of recalls.

In January Toyota announced global sales of 8.42 million vehicles in 2010, just ahead of General Motors\’ 8.39 million, confirming its position as the world\’s biggest carmaker for the third year running but with GM closing in.

Toyota shares closed flat at 3,490 yen at the Tokyo Stock Exchange ahead of its earnings announcement.

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