High gas prices are proving to be the kryptonite of the car world: Even mighty Toyota Motor Corp. has succumbed.
Burdened by a crashing market for big trucks and SUVs, the Japanese carmaker reported a 28% earnings decline for the first fiscal quarter Thursday, its worst profit decline in five years.
Toyota, once a small-car specialist, has in recent years taken on the look of a General Motors Corp., making all types of vehicles and getting footholds in all markets. And while that strategy has helped it grow immensely -- through June it was outpacing GM in global sales by more than 275,000 vehicles -- it has also left it more exposed to market fluctuations.
In the last few years, Toyota bet big on SUVs and pickups in the U.S., building new factories here to produce the highly profitable machines, including the Tundra full-size pickup, which debuted in 2007. But with gas soaring past $4 this year, consumer interest in the once-popular vehicles has fallen off a cliff. That has driven down both new sales and used prices, a one-two punch that has hurt both Toyota's sales and leasing business.
Honda Motor Co., by comparison, reported first-fiscal-quarter earnings growth of 8.1% last month. Unlike Toyota, Honda never ventured into the largest vehicles, sticking instead to fuel-efficient cars.
"It's a risk and reward thing," said Jim Hossack, industry analyst at Tustin-based AutoPacific.
"Toyota sought the reward of going after high profits in trucks. Now they're facing the risk of having gone after a collapsing market."
Through July, Toyota's U.S. sales are down 7.6%, but its truck and SUV sales here are down 15.1%. Rival Nissan Motor Co., which also entered the U.S. truck market in the last few years, has seen its truck segment sales fall 9.5% on the year, and in the first quarter reported a 42% slide in net income.
GM, Ford Motor Co. and Chrysler have been hit even harder on trucks, with U.S. sales in the category falling 23%, 18% and 26%, respectively. Last week, GM reported a $15.5-billion second-quarter loss, and last month Ford said it lost $8.7 billion on the quarter, its worst-ever return.
Toyota remains profitable, having earned 353.7 billion yen ($3.2 billion) for the quarter. That compares with 491.5 billion yen ($4.5 billion) a year earlier; its revenue declined by 4.7%.
Last month, Toyota lowered its 2009 sales target to 9.5 million vehicles worldwide, a 350,000 reduction from previous estimates.
