We have become so used to the Toyota Motor Company posting profits year after year that it comes as a nasty shock to learn they will be in the red. And not just in the red, but $4.95 billion in the red. These numbers, though bantered around constantly these days, are still hard for humans to comprehend. Suffice it to stay that this is a staggering sum of money.
Making matters worse is the forecast for the future, which indicates no immediate reversal in the trend. Will Toyota become jeopardized like the Detroit 3, depending on government assistance and massive loans to stay afloat? More importantly, what will it take to turn the economic situation around and get customers back into the showrooms? This author believes it will take unique alternate energy vehicles that do not cost a fortune, vehicles unlike the Chevy Volt. The Honda Insight is a good start, but it still is just an internal combustion engine with better gas mileage. I want electric cars, more CNG and LPG and more biofuels.
From Automotive News:
"Cascading red ink in North America and Europe prompted Toyota Motor Corp. today to forecast an annual loss three times greater than what it had projected earlier and seek $5.5 billion in cost cuts.
The world's largest automaker now says its first annual operating loss in seven decades will be ¥450 billion ($4.95 billion) for the fiscal year that ends March 31.
The deteriorating outlook, included in a third-quarter report, comes just six weeks after Toyota scrapped a forecast for a fiscal year profit and projected a $1.65 billion operating loss.
The automaker said it expects its global sales to tumble 17.87 percent to 7.32 million units. That's against December's forecast of 7.54 million vehicles and last year's tally of 8.91 million.
Toyota also will book its first annual net loss since 1950: $3.85 billion. That contrasts with last year's $18.9 billion net profit.
Toyota's results are getting hammered by plunging business in the United States, where industry sales rates reached quarter-century lows at the end of 2008.
Toyota's U.S. sales plunged 15.4 percent in 2008 compared with 2007, while overall U.S. sales fell 18.0 percent. And in January, Toyota sales slipped an additional 31.7 percent, while overall U.S. sales collapsed 37.1 percent.
Meanwhile, the yen's rapid surge against a weakening dollar lopped billions more off company profits.
Toyota's rush to expand North American output, through opening new plants such as its Tundra pickup factory in San Antonio, only added to the automaker's crisis of overcapacity as the market imploded.
"As the business expanded, there may be certain issues we didn't pay enough attention to," Executive Vice President Mitsuo Kinoshita said while announcing results.
Losses and cost cuts
In the October-December fiscal third quarter, North America swung to an operating loss of $1.40 billion. Just a year earlier, Toyota had boasted a regional operating profit of $984.6 million. Sales in the quarter shriveled 31.1 percent to 521,000 vehicles.
Europe didn't fare much better.
The region booked an operating loss of $476.9 million (¥43.4 billion), wiping out a profit of $373.6 million the year before. European sales shrank 23.7 percent in the quarter to 235,000 units.
Kinoshita said Toyota will try to reduce fixed costs by 10 percent.
Key to this will be freezing plans to build plants and expand production capacity. That will affect several projects, including plans to build a Prius factory in Mississippi and set up car plants in China, India and Brazil.
Toyota also will cut spending on marketing and r&d. The goal is to chop $5.49 billion (¥500 billion) in costs, Kinoshita said.
Toyota also may let more workers go, but Kinoshita said no involuntary layoffs will occur.
Last month, Japan's Nikkei newspaper reported that Toyota was considering the elimination of 1,000 full-time jobs in North America and Britain. Said Kinoshita: "Outside of Japan, we intend to make every possible effort to protect the jobs of our employees."
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