UPDATE 3-Toyota sees first oper loss, "unprecedented" crisis

Mon Dec 22, 2008 4:49am EST

(Adds president, analyst comments, carmakers' output cuts)

By Chang-Ran Kim, Asia autos correspondent

NAGOYA, Japan Dec 22 (Reuters) - Toyota Motor Corp (7203.T) forecast a first-ever annual operating loss, blaming a relentless sales slide and a crippling rise in the yen in what it said was an emergency unprecedented in its 70-year history.

Toyota, the world's biggest automaker, had been expected to issue its second profit warning in less than seven weeks after domestic rival Honda Motor Co (7267.T) also cut its outlook again last week, but the downward revision was bigger than predicted.

"This is very, very, very bad," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. "There's a chance they could fall into the red in the next business year as well.

"This is also not just a problem for Toyota. What is good for Toyota is good for the Japanese economy."

Automakers around the world face their toughest business environment in recent memory, caught in a sharp reversal of demand as the financial crisis spreads, squeezing credit and consumer sentiment.

Toyota cut its group operating forecast to a loss of 150 billion yen ($1.7 billion) for the year to end-March, after shocking financial markets last month by slashing its group operating profit forecast by 1 trillion yen to 600 billion yen.

It made a record profit of 2.27 trillion yen last year.

Analyst forecasts on Reuters Estimates ranged from a loss of 150 billion yen to a profit of 800 billion yen for figures not updated since conditions deteriorated in the past month.

Toyota now expects group net profit of 50 billion yen instead of 550 billion yen.

Toyota shares closed down 0.2 percent ahead of the announcement in a firmer Tokyo market .N225. Its Frankfurt-listed shares fell 2.4 percent in light trade.

For a Graphic on Toyota earnings, click:

here

BIG STEP BACK

Like the rest of the industry, Toyota has idled factories, slowed assembly lines and delayed manufacturing projects, such as the start of a Mississippi plant under construction to build the Prius hybrid model, and said it would continue those moves until the tide turned. [ID:nN15325660]

"We are facing an unprecedented emergency," President Katsuaki Watanabe told a year-end news conference. "This is a crisis unlike the crises of the past."

Toyota will postpone all projects to expand capacity, move 16 of its 75 global assembly lines to a single shift, and cancel directors' bonus payments for this year, among a wide range of steps aimed at improving near-term profitability, he said.

Even the electric hand dryers at the company's Nagoya office building have been unplugged in an effort to cut costs.

Watanabe stopped short of projecting what global car sales and earnings would do next year, saying only that Toyota hoped to return to profit and cut capital spending to below 1 trillion yen next year, compared with the 1.4 trillion yen planned this year.

"Conditions next fiscal year could be more severe given the yen's strength and worsening market conditions, unless the company and the government cope flexibly with external factors," Shotaro Noguchi, auto analyst at Mitsubishi UFJ Securities, said.

Toyota lowered its dollar assumption for the remainder of the year to 90 yen JPY= and its euro assumption to 120 yen EURJPY=R, versus current rates of 90 yen and 126 yen.

Honda made a similar move last week, cutting its annual profit forecast by 67 percent, and outlined a list of counter-measures such as putting off non-urgent investments to prop up its profitability. [ID:nT208548] [ID:nT225198]

In the United States, automakers are in even bigger trouble, with President George W. Bush throwing General Motors Corp (GM.N) and Chrysler LLC a lifeline of up to $17.4 billion to stave off bankruptcy. [ID:nSP155126]

India's Tata Motors Ltd (TAMO.BO) has agreed to inject "tens of millions" of pounds into Jaguar Land Rover to prevent an immediate cash flow crisis, the Financial Times reported. [ID:nLM408046]

Elsewhere, Japanese small-car makers Suzuki Motor Corp (7269.T) and Daihatsu Motor Co (7262.T) announced more production cuts, of 29,000 units and 16,000 units, respectively, by the end of March, along with a reduction of non-permanent workers. Germany's BMW BMEG.DE was also considering further production cuts, an executive said. [ID:nLK230889]

Bridgestone Corp (5108.T), Japan's largest tyre maker, on Monday cut its operating profit forecast for 2008 by 24 percent to 118 billion yen on slower tyre demand for new cars and replacement purposes. [ID:nT226SF2VL]

Its French rival Michelin (MICP.PA) said it faced costs of nearly 150 million euros ($209 million) as it cuts back operations to cope with a decline in tyre demand. [ID:nLM570410]

MUM ON DIVIDEND

Departing from past practice, Toyota did not disclose its sales and production forecasts for the coming calendar year, saying it was impossible to predict where the bottom for the global vehicle market lay.

"We need to be prepared for the tough conditions to continue, and maybe even worsen," Watanabe said. He said Toyota was undecided about what to do with its dividend, which rose to a record 140 yen last year and is widely feared to fall.

For 2008, Toyota estimated group-wide global sales, which include sales at units Daihatsu and Hino Motors Ltd (7205.T), at 8.96 million vehicles, down 4 percent from last year.

For the business year to March 31, Toyota lowered its vehicle sales forecast to 7.54 million vehicles from 8.24 million. It sold 8.913 million vehicles last business year. ($1=89.27 Yen) (Additional reporting by Kiyoshi Takenaka, David Dolan and Yumiko Nishitani; Editing by Lincoln Feast)

FILED UNDER: