Toyota makes first annual loss in seven decades

22 December 2008

It's not only the Big Three of American auto that are facing tough times in this economic slowdown. Japanese automaker Toyota will lose money in its core auto manufacturing business for the first time in 70 years this fiscal year, the company said Monday, in a sign of how the global economic crisis is hurting even the mightiest carmakers.

Toyota forecasts a loss of 150 billion yen ($1.7 billion), for the fiscal year ending 31 March, compared to its earlier forecast of 600 billion yen operating profit.

Toyota said the dismal forecasts came "in response to the unexpected degree of the slowdown in the automotive market, and the revision of the assumed exchange rates in response to further appreciation of the yen." The automaker cut its net income to 50 billion yen, down 91 per cent from its earlier estimate of a 550 billion yen net profit.

The Japanese auto giant, which has been neck and neck with General Motors to be the world's largest vehicle-maker, said it still expected to eke out a narrow group net profit for the year. But the company, which just a few months ago appeared to be riding above the ills that have crippled Detroit, said its sales had plunged not only in North America but also in emerging markets.

''The change in the world economy is of a magnitude that comes once every hundred years,'' Toyota's president, Katsuaki Watanabe, told a news conference in Nagoya, Japan, near the company's Toyota City headquarters. Sales last month dropped ''far faster, wider and deeper than expected.'' Calling the current environment ''extremely tough'', he said that the company was ''facing an unprecedented emergency situation'' and admitted that it ''can't see the bottom''.

With some $18.5 billion in cash, and relatively little debt, Toyota is still in far better shape to weather the downturn than GM and Chrysler, which on Friday received a $17.4 billion emergency bailout from Washington. The last time Toyota posted an operating loss was in the year ended March 1938, said spokesman Hideaki Homma.