Toyota closes in on record profit as rivals face expansion pain

Toyota Motor Corp is closing in on a record profit set before the Lehman crisis after topping up its annual net profit forecast by nearly $2 billion and outperforming Japanese rivals as its expansion plans bear fruit.

The world's best-selling carmaker is racking up strong sales in a healthy US market while keeping costs in check and taking a breather from building new facilities, in contrast to Nissan and Honda, which are grappling with heavy expansion costs.

Toyota, one of the most export-reliant Japanese carmakers, is also reaping the benefits of a weakening yen that has boosted its profit margins but acknowledged it will have to start spending more to maintain its advantage.

“Our basic stance of controlling fixed costs and improving gross profit will not change, but we do need aggressive investment in order to brush up on future technology,” Managing Officer Takuo Sasaki told an earnings briefing.

Toyota credited its conservative strategy as a key factor when it raised its net profit forecast by 190 billion yen to 1.67 trillion yen for the year ending in March 2014, just short of its record 1.72 trillion yen from six years ago.

Toyota’s annual operating profit rises by 40 billion yen for every one-yen rise in the value of the dollar.

Toyota, which went through a rapid expansion before booking huge losses in the year ended March 2009, now appears to be in the sweet spot of industry and currency market trends, and is reaping the rewards of it own investments in production. But some analysts warned against complacency.

"There are clearly risks of Toyota starting to lag in growth pace to its peers," said Takaki Nakanishi, an auto industry analyst and chief executive of Nakanishi Research Institute in Tokyo. "If the decisions (on future expansion) are too slow, that may cause slower growth and that could make Toyota's earnings grow slower than its competitors." – (Reuters)