Less than two months ago, the company announced it would see its first annual loss since 1950 and estimated a 150 billion yen shortfall due to a collapse in consumer demand for vehicles amid the global economic downturn. Now the company is upping the damage, saying it expects to lose $5 billion, or 450 billion yen, in its vehicle making operations for the fiscal year ending March 31.
The news marks an abrupt reversal from the record 1.72 trillion yen profit Toyota posted in the previous fiscal year and is another indicator that no automaker is immune to the current financial climate.
The industry as a whole saw dramatic declines in 2008, with sales dropping to their lowest since the 1980s and American car companies struggling to stay afloat by the end of the year. Toyota overtook General Motors in 2008 to become the world’s top selling automaker, but only because GM sales fell faster than Toyota’s.
Toyota posted a net loss of 164.6 billion yen for the third quarter and sold about 443,000 fewer cars than in the same period the previous year. The yen’s rise against the dollar and the euro in the last quarter of 2008 cut overseas earnings for the company as well.
“The financial problems have spread directly to the real economy,” Toyota executive vice president Mitsuo Kinoshita told reporters. “We cannot tell what will happen for the next fiscal year, but we hope we are now hitting the bottom.”
The maker of the popular hybrid Prius, Toyota had positioned itself as the go-to company for fuel efficient cars and pushed expansion until last year, adding plants around the world. While sales of the Toyota Camry and Lexus LS sedans were particularly hard hit, sales of hybrid cars have dropped with the rest of the auto industry, and Prius has seen a 29 percent drop in sales in January versus a year ago.
Many of the new factories that were built are now idle, reported the New York Times.
“Toyota is going to get worse before it gets better,” Tairiku Sakaguchi, an auto analyst at Shinko Securities in Tokyo told the paper. “The question is how quickly they can move to deal with inventory, excess production capacity and other problems.”
Friday’s shut-down of all but one assembly line is the first in a series of production breaks the company has planned
“The production suspensions scheduled for Japan in February and March are part of our effort to keep production in line with market demand,” the company said, reported CNN. “We are carrying out these suspensions fully aware of the necessity to even out production volumes and maintain employment levels.”
There are no plans to shut factories completely, but the Japanese company is aiming to cut its fixed costs by 10 percent. Toyota has cut about 3,000 temporary workers in Japan.
Earlier Friday, Moody’s Investors Service cut Toyota’s credit rating for the first time in a decade, from the highest possible “Aaa” to the second-highest “Aa1.”