Toyota to report its first loss in 68 years

TOYOTA WARNED yesterday that it would suffer its first loss since it began reporting financial results 68 years ago, as the worldwide deterioration in vehicle demand takes its toll on one of the best-run carmakers.

Katsuaki Watanabe, chief executive, said the Japanese automaker would slash business investment, cancel executive bonuses and review its dividend payout as it cautioned that conditions were unlikely to improve in the short- term. "This is an unprecedented emergency," said Mr Watanabe. "Unfortunately, I cannot see now where the bottom will be."

The crisis at Toyota - for years the industry's most profitable producer - underscores the severity of a slump that has pushed weaker American carmakers to the brink of bankruptcy. President Bush announced plans last week to lend General Motors and Chrysler $17.4 billion to survive the next three months.

Mr Watanabe said the cost-cutting measures, which include a freeze on "virtually all" capacity expansion projects worldwide, were designed to allow Toyota to turn a profit on annual sales of as few as seven million vehicles.

Toyota sold 8.9 million vehicles last year and entered 2008 expecting to become the first carmaker to top the 10 million mark, before the credit crisis and recessions in the US, Japan and Europe caused a collapse in demand.

Yesterday, it cut its forecast for the year ending March 31st by a further 700,000 units to 7.54 million, 15 per cent below last year's volume.

Toyota expects to generate an operating loss of 150 billion yen (€1.15 billion) in the current fiscal year, reversing its forecast of a Y600 billion profit. Last year it earned a record Y2,270 billion. At the net level, dividend payments from affiliates and other non-operating income are projected to generate a narrow profit of Y50 billion, down 97 per cent.

Honda, Toyota's biggest domestic rival, last week cut its third-quarter dividend in half as it issued its own sharp profit warning. - ( Financial Timesservice)