Toyota profits drop

15 December 2008

Toyota is likely to report an operating loss of $1.7-billion, with car sales dropping and the Japanese yen rising against the US dollar and the Euro.

Toyota has said that it plans to cut bonuses to board members for this fiscal, given the serious downturn in business on account of the global financial crisis. Toyota's group operating profit during the latter part of the fiscal year 2008 (from October 2008 to March 2009) is expected to slip into the red.

Toyota said that the massive cost cutback in bonuses is meant to ensure that the responsibility of the management for the slump in business is visible, and will enable savings of around a billion yen. This is the first anticipated fall in the company's income and profits in nine years on a consolidated basis for fiscal 2008 that ends in March 2009.

Toyota, while announcing its mid-term settlement in November, had reduced its operating profit forecast by 73.6 per cent to 600 billion yen, and had dropped the full-year net profit by 68 per cent to 550 billion yen. Falling sales and the rapid appreciation of the yen have now ensured that the company can expect an operating deficit of around 100 billion yen on a consolidated basis during the second half of the fiscal, and an 80 per cent drop in profits for fiscal 2008, as compared to the previous year.

Toyota is likely to withhold proposing paying bonuses to its board members at its shareholders' meeting scheduled for June 2009, and is mulling cutting their remunerations.

This would be Toyota's first interim operating loss since 1999. Around a week ago, Toyota announced additional production cuts in North America, rolling back output to adjust for a sharp drop in sales which has impacted foreign auto makers as well as Detroit's Big Three, though it has brought GM and Chrysler to the brink of bankruptcy. Though the company opened its seventh auto assembly plant in North America last week, the company is reducing production at factories in the US and Canada, while halting production of its Tundra pickup truck at San Antonio for over three months.