Thursday, May 08, 2008

Toyota Motor Corporation: Declining profit shows tough time ahead in the USA auto market

Japan’s largest auto maker, Toyota Motor Corporation (TYO:7203), today said that it is expecting a price drop in the USA, its major market. This will be the company’s first sales drop in nine years. Weak economy, rising price of raw materials and yen’s appreciation are the major causes behind the sales drop.

Last financial year that ended in March was great for the company. It made profit from rising markets like Brazil, Russia, India and China. On its way to take over General Motors, the company posted a 4.5% rise in its annual net profit. Operating profit increased by 1.4% and revenue increased to 9.8%. AFP reports:

"We are facing a severe business environment," Toyota president Katsuaki Watanabe said in the earnings statement.

Toyota forecast a 27.2 percent plunge in net profit to 1.25 trillion yen in the current financial year to next March.

It sees a 29.5 percent drop in annual operating earnings to 1.60 trillion yen this year and a 4.9 percent fall in revenue to 25.0 trillion yen.

"It's going to be the first year-on-year decline in nine years which really suggests that even for Toyota the current situation is very, very tough," said Credit Suisse auto analyst Koji Endo.

Last year, the company sold 8.91 million vehicles around the world. It is not only Toyota that would suffer from the USA economy slowdown. Other major auto makers such as Honda Motor Company Limited (TYO:7267), Mazda Motor Corporation (TYO:7261) are also expecting a sales drop.

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