The world's biggest automaker had been expected to issue its second profit warning in less than seven weeks after domestic rival Honda Motor Co. also cut its outlook again last week, but today's downward revision was bigger than analysts predicted.
"We are facing an unprecedented emergency," President Katsuaki Watanabe told a year-end news conference today. "This is a crisis unlike the crises of the past."
The forecast compounds the global automotive crisis and comes three days after General Motors and Chrysler LLC staved off bankruptcy through a U.S. pledge for $17.4 billion in emergency loans. Automakers around the world are caught in a sharp reversal of demand as the financial crisis spreads, squeezing credit and consumer sentiment.
Toyota cut its group operating forecast to a loss of 150 billion yen ($1.7 billion) for the year ending March 31, after shocking financial markets last month by slashing its group operating profit forecast by 1 trillion yen to 600 billion yen.
It made a record profit of 2.27 trillion yen last year.
Like the rest of the industry, Toyota has idled factories, slowed assembly lines and delayed manufacturing projects, such as the start of a Mississippi plant under construction to build the Prius hybrid model. Those moves will continue until the tide turns.
"This is very, very, very bad," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. "There's a chance they could fall into the red in the next business year as well."
Toyota will postpone all projects to expand capacity, move 16 of its 75 global assembly lines to a single shift, and cancel directors' bonus payments for this year, among a wide range of steps aimed at improving near-term profitability, Watanabe said.
Even the electric hand dryers at the company's Nagoya office building have been unplugged in an effort to cut costs.
+ Nov.2008 Auto Sales: Toyota Sales Slump 34%
+ Nov.2008 Auto Sales: Toyota/Nissan Led Biggest Drop in Japan in 34 Years
+ Nov.2008 Auto Sales: U.S. Auto Demand Lowest Since 1982
No projection for next year
Watanabe stopped short of projecting what global car sales and earnings would do next year, saying only that Toyota hoped to return to profit and cut capital spending to below 1 trillion yen next year, compared with the 1.4 trillion yen planned this year.
"Conditions next fiscal year could be more severe given the yen's strength and worsening market conditions, unless the company and the government cope flexibly with external factors," said Shotaro Noguchi, auto analyst at Mitsubishi UFJ Securities.
Toyota lowered its dollar assumption for the remainder of the year to 90 yen and its euro assumption to 120 yen, versus current rates of 90 yen and 126 yen.
Honda made a similar move last week, cutting its annual profit forecast by 67 percent, and outlined a list of counter-measures such as putting off non-urgent investments to prop up its profitability.
Departing from past practice, Toyota did not disclose its sales and production forecasts for the coming calendar year, saying it was impossible to predict where the bottom for the global vehicle market lay.
"We need to be prepared for the tough conditions to continue, and maybe even worsen," Watanabe said. He said Toyota was undecided about what to do with its dividend, which rose to a record 140 yen last year and is widely expected to fall.
For 2008, Toyota estimated group-wide global sales, which include sales at units Daihatsu and Hino Motors Ltd, at 8.96 million vehicles, down 4 percent from last year.
For the business year to March 31, Toyota lowered its vehicle sales forecast to 7.54 million vehicles from 8.24 million. It sold 8.913 million vehicles last business year.
Said Daiwa SB analyst Ogawa: "This is also not just a problem for Toyota. What is good for Toyota is good for the Japanese economy."
