North American sales put brakes on Toyota
Written by Writer on Saturday, November 8th, 2008
N. American sales put brakes on Toyota
Mitsuhiko Totsuka Yomiuri Shimbun Staff Writer
The sharp drop in Toyota Motor Corp.’s operating profit can be attributed to a slump in sales in overseas markets, particularly in the United States, as the global economy slows.
“We’ve overcome a number of crises before, but this is an emergency we’ve never faced,” Executive Vice President Mitsuo Kinoshita said at a press conference Thursday as the nation’s top automaker drastically slashed its earnings forecast for the business year ending in March.
Toyota, which has been trailing General Motors Corp. for the top spot in global automobile sales and has had a reputation as a winning company, projected a 73.6 percent dive in consolidated operating profit from the last business year to 600 billion yen due to dwindling overseas demand. The company’s North American division comprises half of the company’s overall profits.
Toyota has been able to weather sluggish domestic business with its overseas operations. But the decline in overseas sales sees no sign of touching bottom.
The North American division saw a sales drop of 14 percent in the July-September quarter from the same period last year to 620,000 units, led by falls in sales of large vehicles, such as pickup trucks. In the April-June quarter, the division generated 69.1 billion yen in operating profit, but for the July-September period, the division went 34.9 billion yen into the red.
The European division also was awash in red ink with a 11.5 billion yen operating loss in the quarter due to slow sales of luxury models, such as the Lexus brand.
The company began offering zero interest rate loans for most models in the U.S. market in October to boost sales, but sales for the month still declined 23 percent from the same month a year before.
“The situation’s getting worse day by day,” Kinoshita said.
As Toyota has posted 582 billion yen in operating profit for the first half, the projected 600 billion yen profit for the year means the company expects only a 18 billion yen profit in the second half.
To improve the situation, the company said it would consider a major overhaul of its production system, including a review of plans to build new plants. It also plans to focus more on fuel-efficient cars by introducing four new hybrid models, including the next-generation Prius, in Japan and elsewhere next year.
But it will take a while for the company to find a new core field that can compensate for sluggish sales in North America. This means tough times for Toyota likely will continue for a while.
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Regional economies feel impact
Toyota’s slump has started to affect the entire auto industry as job cuts take place at parts makers, subsidiaries and affiliates. The negative effects on regional economies cannot be avoided.
Toyota Motor Kyushu Inc., a subsidiary that produces the Lexus and Harrier brands, withdrew its initial plan to rehire 500 of 800 temporary workers whose contracts were terminated between June and August.
Toyota affiliate Denso Corp. slashed 800 term employees in the six months through September, while Toyota Industries Corp. cut 500 jobs.
In Aichi Prefecture, where parts makers that have contracts with Toyota are concentrated, the ratio of job offers to job seekers declined 0.1 percentage point in September from the previous month–the biggest drop among all prefectures. This is apparently because Toyota-related companies were forced to trim production in step with Toyota’s plans to cut production, leading to cutbacks in capital investment and the slashing of nonregular jobs.
Toyota Industries President Tetsuro Toyoda said, “Now is the time to have patience when doing business.”
(Nov. 8, 2008)
