Toyota Motor Corp. said Thursday annual profits are expected to plunge more than two-thirds to the lowest level in nine years, warning the global auto industry faced an “unprecedented” crisis.
The Japanese firm said it was reviewing its expansion plans as it became the latest car giant to reveal plunging profits due to the financial crisis, following on the heels of BMW, Nissan and Honda.
Toyota , vying with General Motors for the title of the world's top automaker, now expects earnings of 550 billion yen (5.6 billion dollars) in the current year to March, down from the 1.25 trillion yen previously projected.
That would mark a decline of 68 percent from the previous year — the first drop in Toyota's annual earnings in nine years.
“The severity of the current situation is like nothing we have seen before,” Toyota executive vice president Mitsuo Kinoshita said.
“The global financial crisis has affected the real economy, and the auto markets, particularly in developed countries, are suddenly decelerating.”
Toyota said its first-half earnings tumbled 48 percent to 493.47 billion yen due to a stronger yen and weak global economy. Operating earnings fell 54.2 percent to 582.07 billion yen as revenue dropped 6.3 percent to 12.19 trillion.
“This is an unprecedented situation. It is difficult to predict where this will end,” Kinoshita said.
The global slowdown has badly shaken Japan's automakers, which in recent years have cashed in on worldwide demand for their smaller and more fuel-efficient cars.
In North America, the epicentre of the global credit crunch, Toyota lost 34.6 billion yen excluding one-off gains from derivatives. Profits in Europe plunged.
“Most of these automakers are so dependent on the US market that it doesn't matter if they're doing well in China or other markets,” said Ashvin Chotai, managing director of Intelligence Automotive Asia, a consultancy firm in London.
“It's hard to be optimistic about sales” in the US, he said.
“The economy is now in recession. You're seeing a lot of layoffs and most importantly the credit squeeze in the financial markets is seeping into credit decisions for vehicles purchases,” he added.
But analysts noted that Toyota was still doing better than US rivals such as General Motors, which lost 15.5 billion dollars in the second quarter of 2008.
“At least there's no red ink at the moment. But if the situation deteriorates we could be looking at that,” said Chotai.
Toyota shares dived 10.35 percent to 3,810 yen on fears of weak earnings, which were posted after the market closed.
Toyota had enjoyed brisk sales and profits as strong interest in its fuel-efficient vehicles put it on course to overtake ailing General Motors as the world's top-selling automaker.
Toyota said its top managers were reviewing its expansion plans in light of the slump.
“Planned factories, existing facilities, new projects; they are reviewing all of them,” said Kinoshita.
“Capital investment will be lowered significantly. We are reviewing all of our costs and examining ways to maximise sales,” he said.
The auto giant recently announced a plan to expand investment in India, where automobile sales are forecast to rise sharply as the economy expands and middle-class incomes rise.
It also said earlier that it was planning to resume operations of three factories in the United States after a three-month suspension for exports for growing Middle Eastern and Latin American markets, despite slower US sales.
Toyota sold 4.25 million vehicles globally in the first half, 51,000 fewer than a year earlier.
