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Toyota sees first annual net loss since 1950

February 07, 2009|Ken Bensinger

Add Toyota Motor Corp. to the pile of money-losing car companies.

The Japanese giant said Friday that it had swung to a $1.8-billion loss in the third quarter of the fiscal year, and warned that it would report a full-year net loss of about $3.9 billion -- the first time since 1950.

It's the latest piece of bad news for the company. Despite capturing the global sales lead from General Motors Corp. in 2008, Toyota's year was marked by collapsing sales in crucial markets, fallout from questionable investments in truck manufacturing in the U.S. and a sky-high yen that made formerly lucrative business lines money losers.

Just over two weeks ago, the company demoted its top executive, Katsuaki Watanabe, handing control to Akio Toyoda, grandson of the company's founder. And Friday morning, rating agency Moody's cited a "rapid decline in sales in developed markets" and volatile exchange rates in a decision to downgrade Toyota's debt, raising the cost of borrowing for the automaker. Standard & Poor's also gave Toyota a downgrade.

For The Record
Los Angeles Times Tuesday, February 10, 2009 Home Edition Main News Part A Page 2 National Desk 1 inches; 51 words Type of Material: Correction
Toyota: An article in Business on Saturday about Toyota Motor Corp.'s predicting its first annual loss since 1950 said the automaker's previous top executive, Katsuaki Watanabe, had been demoted to make way for current President Akio Toyoda. In fact, Watanabe was named vice chairman, a senior, nonexecutive position at the company.

Toyota Executive Vice President Mitsuo Kinoshita said Friday that the company would be "reviewing our entire business to reduce costs across the board." The company has established an "emergency profit improvement committee" to examine operations for ways to raise the bottom line.

Toyota has already cut global production and shelved plans to open a plant in Mississippi to build the Prius hybrid. The factory, already under construction, will be finished but Toyota won't install the tooling for vehicle production.

In addition, Kinoshita said Toyota would develop "a new product lineup that responds to the customers' requirements in each region," with an increased focus on hybrid vehicles and small cars.

Toyota, like other carmakers, must also turn around sales. The company's U.S. sales declined 15.4% in 2008; in January, U.S. sales were down 32% over the previous year and even sales of the low-cost Yaris subcompact declined 42%. In the third quarter, Toyota lost $2.7 billion in North America.

Worldwide revenue for Toyota in the quarter was down 28%, to about $52 billion.

In December, the carmaker surprised analysts by saying it expected to report an annual operating loss of about $1.7 billion, a huge turnaround from fiscal 2007, when Toyota posted a $28-billion operating profit. In December, the company said it still expected to turn a small net profit for fiscal 2008. Today it said it expected its operating loss to total nearly $5 billion.

The last time Toyota posted a loss on operations was 1937, when its first vehicle, the Model AA, was in its second year. Seven decades later, Toyota is a global industrial monster with more than 300,000 employees, two major brands and stakes in industrial ventures such as biotech and battery development.

Long admired for its ultra-efficient manufacturing techniques, Toyota has for more than two decades been held up as an example to American carmakers losing market share.

But the current economic downturn is proving so severe that even what has been called the world's best car company is beginning to succumb. Its financial woes are echoed by other Japanese automakers. This week Honda and Nissan issued profit warnings, and Mitsubishi and Mazda said they would likely post net losses for 2008.

Unlike the Big Three U.S. automakers, however, Toyota has large cash reserves and a profitable dealer network, which explains why its debt is still highly rated whereas GM, Ford and Chrysler have been below junk status for years.

Toyota's U.S.-traded shares rose 57 cents Friday to $69.38.

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ken.bensinger@latimes.com

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