Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., Japan’s three biggest automakers, may report quarterly losses after the global recession crippled sales. South Korea’s Hyundai Motor Co. may also say its profit fell to the lowest in at least seven years.
Toyota probably had a net loss of 678 billion yen ($6.9 billion) for the three months ended March 31 from a profit of 317 billion yen a year earlier, according to the median of four analyst estimates compiled by Bloomberg. Net income at Hyundai, South Korea’s largest automaker, probably tumbled 48 percent.
Vehicle demand in the U.S., the world’s biggest auto market, plunged last quarter as the unemployment rate rose to the highest in 25 years. Japanese carmakers have also slashed jobs and production and Toyota will cut managers’ pay while Japan, Germany and China began offering incentives for motorists to spur auto sales.
“This terrible environment will hammer the carmakers for most of the year,” said Ichiro Takamatsu, chief investment officer at Alphex Investments Co., a Tokyo-based hedge fund. “The companies may only begin to recover toward the end of the year and in 2010 as sales will remain weak.”
GM, Chrysler
The U.S. recession has also forced Detroit automakers General Motors Corp. and Chrysler LLC to turn to government aid to stay in business. Last quarter, Japan’s auto market shrank 24 percent, and overall sales in Europe fell 17 percent.
Honda’s loss, the carmaker’s first in at least 15 years, was about 243.2 billion yen last quarter, compared with a 25.4 billion yen profit a year ago, according to analysts. Nissan had a loss of about 405.6 billion yen, according to the analysts. That compares with a 137.6 billion yen profit a year ago.
Hyundai plans to report its quarterly earnings on April 23. Net income likely fell to 205 billion won ($151 million), according to the median estimate of 11 analysts surveyed by Bloomberg.
Honda, Japan’s second-largest automaker, will report earnings on April 28. Toyota, the world’s largest automaker, is scheduled to release results on May 8, followed by Nissan on May 12.
Toyota added 1.1 percent to 3,760 yen, at the 3 p.m. close in Tokyo. Honda dropped 0.6 percent to 2,715 yen, and Nissan gained 1.6 percent to 508 yen. Hyundai rose 2.3 percent to 66,000 won in Seoul.
“Drastic Restructuring”
“Japanese automakers will have to take drastic restructuring measures to return to usual profit levels,” as their operating losses may top more than 1 trillion yen this fiscal year, Shinya Naruse, analyst at Nomura Securities Co., said in a report on April 10.
Industrywide sales in the U.S., traditionally the most profitable market for Toyota, Honda and Nissan, plunged 38 percent in the first three months of this year. In contrast, Hyundai boosted its sales 0.5 percent, as it offered more incentives to lure customers.
Toyota’s sales probably plunged 39 percent to 4 trillion yen from 6.57 trillion yen last quarter, the analysts said. The company probably had an operating loss of 588.8 billion yen, compared with a profit of 396.7 billion yen, the analysts said. The carmaker said today it would cut summer bonuses of managers in Japan by 60 percent from a year earlier.
Honda had an operating loss of 332.7 billion yen after sales slipped 39 percent to 1.87 trillion yen. Nissan will probably report an operating loss of 272.3 billion yen on sales of 1.65 trillion yen, according to analysts’ estimates.
Stronger Yen
A stronger yen against the dollar and euro added to Japanese automakers’ losses, as they export about half of their vehicles from Japan. The yen averaged 93.63 per dollar in the three months ended March 31, compared with 105.44 a year earlier. The euro was bought at 122.41 yen in the quarter, compared with 157.88 last year. Toyota based on its estimates for the period on 90 yen to the dollar and 120 yen to the euro.
Every 1 yen gain against the dollar and euro cuts Toyota’s annual operating profit by 35 billion yen and 5 billion yen, respectively. It cuts Honda’s operating profit by 15 billion yen and 2 billion yen.
Hyundai’s sales likely dropped 22 percent to 6.36 trillion won, and operating profit probably tumbled 60 percent to 211 billion won, according to the analysts. The won dropped 8.9 percent versus the dollar during the January-March period. A weaker won helps boost repatriated value for Hyundai’s exports, which accounted for 66 percent of the Hyundai’s revenue in 2008.
“It’s meaningful that Hyundai still made profit after it boosted marketing spending to increase share,” said Stephen Ahn, the head of research at LIG Investment & Securities Co. “No matter what it costs, it’s now a condition of survival for automakers to keep up factory utilization and expand market share.”
Kia Motors Corp., South Korea’s second-biggest automaker, may have posted a net income of 34.8 billion won last quarter, compared with a 24.8 billion won loss a year earlier, the analysts said. Sales may have fallen 7.5 percent to 3.44 trillion won while operating profit probably declined 22 percent to 80 billion won.
