Toyota Motor Corp. today reported a surge in annual profit, but its fourth-quarter earnings tumbled after the massive earthquake in Japan brought the company's operations to a halt in March, the last month of the Japanese fiscal year.
For the fiscal year that ended March 31, Toyota's net profit nearly doubled to 408 billion yen, or $4.7 billion -- reflecting higher vehicle sales and stringent cost savings. But its profit for the January-March quarter slid 77 percent to 25.4 billion yen, or $300 million, after the quake damaged and destroyed auto-parts suppliers in northeastern Japan, reported The Detroit News.
Toyota President Akio Toyoda provided an update today on the automaker's efforts to restore production, but the company did not issue its traditional profit and sales forecast for the year just begun. Toyoda said the company would provide a forecast by mid-June.
Last year, Toyota's operating earnings roughly tripled, to 468.2 billion yen, or $5.4 billion, as demand for its vehicles rose in Asia and other emerging markets. The automaker's annual sales rose to 8.42 million vehicles, from 8.14 million.
But Toyota's annual earnings fell short of the company's forecast because of the impact of the March 11 quake — valued at 110 billion yen, or $1.3 billion, in last year's results.
Most analysts expect Toyota to show a loss for at least the first half of the current fiscal year and lose its ranking as the world's biggest automaker to General Motors Co. Toyota's domestic car-making operations were almost entirely halted for more than a month after the quake, and are now running at around a 50-percent rate.
During the January-March quarter, Toyota sold 1.79 million vehicles worldwide, falling behind not only GM, which sold 2.22 million vehicles, but also Volkswagen AG, which moved into second place with global sales of 1.99 million vehicles.
"Toyota's production will most certainly fall from last year's level, while both GM and Volkswagen will make big gains in the United States, Europe and China," said Koji Endo, an auto analyst at Advanced Research Japan in Tokyo. The Japanese carmaker's global output may decline to fewer than 6.5 million vehicles this year, from 8.4 million last year.
Toyoda said he and other Toyota executives are "gritting our teeth" to keep jobs in Japan. In comparison with other Japanese automakers, Toyota produces a larger proportion of its vehicles in Japan — about 45 percent of the total, compared with around 25 percent for its main rivals, Nissan Motor Co. and Honda Motor Co.
"I fully understand that we can't go on with just a desire to protect manufacturing in Japan," Bloomberg News quoted Toyoda as saying. The automaker is underpressure to keep jobs in Japan but has been hit hard by the impact of the quake and the strengthening yen. Its rise had a negative impact of 290 billion yen, or $3.3 billion,on Toyota's annual operating earnings.
The company's efforts to restore its factory output, however, are proceeding faster than initially expected, Toyoda said. It expects to increase production worldwide to about 70 percent of pre-quake levels in June, more than a month ahead of schedule.
Toyota estimates the supply disruptions caused by the quake, tsunami and power shortages caused by a flood-damaged nuclear power complex have cost it 550,000 vehicles in lost output in Japan through May and another 350,000 vehicles overseas.
"By reviving our company, we want to help bring about Japan's comeback," Toyoda told reporters.
The company said last month that it expected global production to reach pre-quake levels by November or December of this year.
"Toyota takes a cautious approach and has not changed its estimate of a return to normal production from November-December, but we think it could happen in October," said Noriyuki Matsushima, a Tokyo-based analyst at Citi Investment Research & Analysis.
Toyota may be facing a fresh challenge, however, after the Japanese government called for the shutdown of the Hamaoka nuclear power plant. Located on a fault line, the Hamaoka plant supplies power to the central region of Japan's Honshu island, where many Toyota plants are located.
Toyoda would not say what impact the Hamaoka plant shutdown might have on the company, but he said it would strive to secure stable power supplies.
Toyota still struggles with scarce supplies of about 30 components, he said. It was unable to get 500 different parts after the quake, and had brought that figure down to 150 in recent weeks.
The natural disasters struck the automaker just as it was beginning to emerge from a recall crisis that dented its sales and its reputation in the United States. The U.S. government had fined Toyota heavily for failing to issue recalls in time, but essentially exonerated its vehicle electronic systems after a long investigation into reports of alleged unintended acceleration.
Takahiko Ijichi, a senior managing director at Toyota, said warranty andrecall-related expenses rose last year to 590 billion yen, or $6.86 billion, from 560 billion yen, or $6 billion, the year before. In a call with analysts and investors, Ijichi said those expenses were likely to peak in the current fiscal year and then decline.
Toyota and other Japanese exporters also were hurt by the strong yen. It rose further after the quake, as the Japanese unloaded overseas assets and bought yen in currency markets to help pay for the country's reconstruction.
The yen averaged 86 to the dollar in the last fiscal year, compared with 93 in the prior year. A dollar today fetches just 81 yen.
All of Japan's manufacturers are affected. Honda reported a drop in fourth-quarter net income of 38 percent, to 44.5 billion yen, or $520 million. Nissan, Japan's second-largest automaker after Toyota, is scheduled to report earnings on Thursday.
