Toyota heading for first loss in over 70 years

The doom and gloom surrounding the car industry continues today with the news that Japan’s largest carmaker, Toyota, is due to post its first operating loss in 71 years, following a surge in the value of the yen and a dramatic fall in exports.

Toyota said it expected losses through to 31 March 2009 to total ¥150 billion (£1.1 billion), a significant fall on its previous forecast of a ¥600 billion operating profit.

Last year, the firm recorded an operating profit of ¥2.27 trillion and was all set to overtake US giant, General Motors, to become the largest carmaker in the world, in terms of sales.

Katsuaki Watanabe, Toyota’s president, said the company now expects to sell 8.96 million vehicles globally this year, down 4% from the previous year.

A strong yen has eaten into Toyota’s overseas earnings and also hit their profits, the US dollar has plummeted to lows not seen since 1995 against the yen.

However, Toyota is not the only Japanese carmaker affected, as they have all been hit by falling car sales due to the economic downturn which, in turn, is having a major impact on consumer spending.

Last week, Honda slashed its annual profit forecast by 67%, as have other Japanese carmakers, who have had no choice but to reduce production and lay off workers.

According to Koichi Ogawa of Daiwa SB Investments, the news from Toyota is very bad since this is not just Toyota’s problem. What is good for Toyota is good for the Japanese economy.

The news is similar throughout the world. In the US, President Bush announced a $17.4 billion package of emergency loans to struggling carmakers General Motors and Chrysler, as they face the prospect of bankruptcy.

Chrysler is to close all 30 of its manufacturing plants for a month after it said potential buyers are staying away from their showrooms, while GM is to close 30% of its North American output.

Meanwhile, in the UK, figures from the Society of Motor Manufacturers and Traders (SMMT) have revealed that the number of cars built in November in the UK was down 33% compared with the same month last year.

The news from Toyota comes as Tata Motors, the owner of Jaguar Land Rover, is set to pump millions of pounds into the struggling carmaker.

Story link: Toyota heading for first loss in over 70 years