Toyota forecasts US$4.95 billion loss
February 7, 2009 by David Twomey
Plunging sales in North America and Europe have prompted Toyota Motor Corporation to offer its gloomiest yet forecast, projecting an annual loss three times greater than earlier suggested.
At the same time it said it was looking to cut $5.5 billion in cost, including from its research and development and marketing budgets .
The world’s largest carmaker now says its first annual operating loss in seven decades will be ¥450 billion (US$4.95 billion) for the financial year that ends March 31.
The deteriorating outlook, included in a third-quarter report, comes just six weeks after Toyota scrapped a forecast for a fiscal year profit and projected a $1.65 billion operating loss.
The carmaker said it expects its global sales to tumble 17.87 per cent to 7.32 million units. That’s against December’s forecast of 7.54 million vehicles and last year’s tally of 8.91 million.
Toyota also will record its first annual net loss since 1950: $3.85 billion. That contrasts with last year’s $18.9 billion net profit.
Toyota’s US sales plunged 15.4 per cent in 2008 compared with 2007, while overall US sales fell 18.0 per cent. Last month, Toyota sales slipped an additional 31.7 per cent, while overall US sales collapsed 37.1 percent.
At the same time, the yen’s rapid surge against a weakening US dollar lopped billions more off company profits.
“As the business expanded, there may be certain issues we didn’t pay enough attention to,” Executive Vice President Mitsuo Kinoshita said, in a rare admission of business error, while announcing results.
The story for Toyota has been similar in Europe where the region recorded an operating loss of US$476.9 million (¥43.4 billion), wiping out a profit of US$373.6 million the year before. European sales shrank 23.7 per cent in the quarter to 235,000 units.
Mr Kinoshita said Toyota will try to reduce fixed costs by 10 per cent, mostly by stalling plans to build a Prius factory in Mississippi and set up car plants in China, India and Brazil.
Toyota also will cut spending on marketing and r&d.
Last month, Japan’s Nikkei newspaper reported that Toyota was considering the elimination of 1000 full-time jobs in North America and Britain.
Said Mr Kinoshita: “Outside of Japan, we intend to make every possible effort to protect the jobs of our employees.”
Print it: 
This is very grim news for Toyota.
There will be winners and losers with this economic trough, I think Hyundai in particular is going to come out the other end with a big spike in market share.
They don’t seem to be feeling it as much, though this may be because they aren’t as heavily reliant on the US market as the other manufacturers.
An almost $25 Billion turnaround in profits from last year?
Seems we should be talking about the Big 4, not just the US Big 3.
Why halt the building of the Prius factory in the US?
Hasn\’t toyota repeatedly announced that they can\’t build Hybrids fast enough?
It shows that every company gets fat & complacent during the good times, then has to take drastic action to correct their mistakes.
Reduced marketing, R&D, & cancelling new factories, etc
Yes there taking a loss just like evryone else.No one is safe from these times.But unlike GM there not going bunkrupt and need money from tax payers to stay afloat not yet anyway
And the impact on their share price from this annoucement?
The highest price in 3 months… lol wtf?!
Hopefully this will wake them up. It’s not enough to make boring fridges. Yes, quite reliable machines but everything can be reliable if not driven at its limit. As long as a car is made in Japan, I find them pretty good – Japanese-made Mazda, Subaru and Toyota should have pretty similar build qualities.
I bought a TRD Aurion, it’s quite a good car but the obvious fact is it should have been a RWD/AWD rather than a FWD. It’s not enough to pretend to be exciting. You have to build the car ground up to be exciting. The Corolla has so much plastic – it’s lost its appeal to me. RAV4 has become a big, bumbling joke with more grunt than grip. However Kluger is a fantastic car, Prado needs an update and Landcruiser is still the camel of the desert.
Bring back the Supras, Celicas and make all future TRD cars (if they are revived) RWD/AWD. That’s the only way you can keep your relevance with Gen Y.
Hyundai – Kia posted a 3.5% increase in sales from the US alone. The current economic crises seems to benefit the market for them. Kia is about to open their Georgia plant as well.
totota is about the richest car manufacturer anyway, so shouldn worry them to much, unlike ford and gm at the moment, plus toyota has some good but boring product at the moment..
Zorro, here’s an opportunity for you to test your maths skills.
Which number is higher, 39 billion dollars or 3.85 billion?
One was GM’s net loss, one is toyota’s net loss.
Salesman, whilst Hyundai and Kia have grown, don’t forget they are still fledglings at present and Korea itself is just starting to feel the global squeeze, they will be okay but don’t expect them to continue growing at that rate this year. (yes i’ll put a carton of crownies on it)
Osu811 Doesn’t mater how rich you are, if you have a global burn rate such as that without the parasital outgoing of the D3, then you have a huge problem. Do not forget that 150,000 people in one of Toyotas main manufacturing cties have lost their job in the last 6 months.
But the most amussing part of this is how much creative accounting has been going on?? At first they tone down their expected profit, then they call a small loss sack the ceo’s put in a new head and call a large loss!!! Will be interesting to see the full story come out.
RoFlmaTiC Says:
February 7th, 2009 at 4:25 pm
Try these maths turning round from +18.9bil to -3.95bil without the social costs and exorbanant union fees!!
Agreed Frontman,
No one is immune. Although with the introduction of five new models in Kia alone i think the spotlight will be on Kia allot this year. Plus economical pricing makes them attractive to customers wanting to downsize.
JJT,
A loss is a loss no matter what way you look at it. I agree Toyota has the knowledge, experience and wealth to move more swiftly to “adjust” and re size to fit the market more swiftly than others and keep an operating profit in doing so. This does not make them the be all and end all in the motoring world. It just makes them the smartest.
Honestly how can you NOT laugh at a company that revalues its assets down 40 odd billion from 150 billion to 110 billion.(Whilst liabilities remained at 170 billion).
Sounds to me like a bit of creative accounting as Frontman mentioned preceded that particular write off!
I seem to be getting this vision of Americans riding bicycles by the thousands because soon enough they’re not going to have any cars to drive after ALL the manufacturers go bust. Just imagine, drivebys will never be the same again…
Probably why stainless steel appliances are the same price because Toyota is buying up all the appliance white paint.
Perhaps Car Advice bloggers should pass the virtual hat around?
Wheres Dan, the guy who says hes never bought a toyota but owns a lexus IS250? Does he know the 1st gen IS was badged as a toyota altezza in japan? Guess he was right, the badge doesnt make a difference.
Wait a minute, he was wrong! He has bought a toyota!
Wonder where he is, must be in shock because the Mazda3 outsold his beloved corolla i guess. Oh well. ;)
Cutting development costs? I thought carrying the basic-Camry architecture for all these years saved a heap of cash
Toyota may not be bankrupt yet, but I doubt it shall last long with $18.5 billion left in the bank
Roflmatic: if a football team loses a game by 4 points or 40 points – they still lose don’t they?
Schadenfreude. Look it up.
Whilst GMs loss maybe $39bn.. it has been greater than that over previous years.. so technically speaking even though they are still in the red GM have been showing signs of improvement [thanks due to subsidiaries such as Holden and Opel] as they gradually edge their way closer to break even – whereas Toyota have suddenly plummeted into the red.. its just a matter of perspective I guess
Quote [Neil]: Toyota may not be bankrupt yet, but I doubt it shall last long with $18.5 billion left in the bank
$18.5bn.. Toyotas F1 team will burn all that up in the first couple of rounds this year
hahaha Falcondore………I think he was Dingo babe!
Soooo true Salesman!
Can some one tell me how much their bank balance has gone down in the last 12 months……….
hahah Alex you know why…..Australian like battlers not braggers.Ever dog has its day……..seems Toyota has found theirs this year and there’s more to come.
Alex if by “Schadenfreude” you mean or ara appalled that we are taking delight in the suffering of another [in this case Toyota]
It’s because; in case you haven’t noticed over the last year or so the handful of Toyota fans who contaminate this site have taken delight in GMs and Fords financial problems at every chance they get.. not to mention the possibility of Holden and Ford leaving Australia – not realising that if theat were to happen its most likely that Toyota would also leave.
Therefore; we are merely replying in a similar fashion.. I guess its not as much fun when you’re the victim is it?
Quote [Don't Be Sour Grapes]: I bought a TRD Aurion, it’s quite a good car but the obvious fact is it should have been a RWD/AWD rather than a FWD. It’s not enough to pretend to be exciting. You have to build the car ground up to be exciting.
Its good to hear from someone who bought a TRD and even better to read that it’s not as exciting or as perfect as the handful of Toyo-philes on this site would like us to believe.. Do you still own the TRD?
Wheelnut, what I mean is that what is probably the most trusted car brand in the world is starting to show holes. I am happy that they are not doing well because they sell mass amounts of sub-standard cars and yet people keep going back to them so they think it’s OK and keep doing it.
Wheelnut, even premiership teams lose a few matches in the season. The net loss is only 2.5% of the total equity of Toyota.
Toyota has assets worth 33 trillion yen, and liabilites of 21 trillion. In US dollars, this is equivalent to 130 billion USD equity.
GM has assets of 110 billion, and 170 billion in liabilities. A net deficit of a whopping 60 billion.
In summary, Toyota needs to make 4 billion dollar annual losses for the next 50 years to be as screwed as GM are.
Don’t get breakeven confused with equity either Wheelnut; GM would need to make 60 billion dollars of “profit” for their balance sheet to simply break even. Companies with far better financials than GM file for chapter 11.
Salesman. Whilst Toyota appear smart, they are NOT the fastest in the business at reinventing themselves. Have a look at how long it took them to get into the most lucrative US market (pick-ups). It took 10 years of reverse engineering F trucks to get anyone to take notice, and even then they were too late. I mean realistically (as much as other deny it) Ford or rather Mullaly saw this coming 4 years ago and set about restructuring Ford. Meanwhile Toyota plowed on and are now starting to pay the piper. This is the cost of that poisoned chalice they call Number 1. Hyundai/Kia have Toyota firmly in their sights are are gunning to knock them off. You are right in your apraisel of them as them as they are the true fast movers in the world (even if it does take five years to happen)
RoFlmaTiC
A loss is a loss is a loss – how the once (apparantly) mighty have stumbled, and the story will only get worse for Toyota with the rise of the Koreans, particularly Hyundai and partner Kia.
Would you like cream with your humble pie?
Wow nice cliche?
The koreans annual profits peaked at around 800 million US dollars before they slumped Q4 last year. They are small fry. They might be selling more cars, but they sell mostly small cars which are well known for having lower margins and explains the small profits when compared to annual sales.
As has been shown, simply selling more cars doesn’t necessarily equate to profits (GM). Porsche is a testament to that.
As I said in my first post, Hyundai will come out of the recession with a bigger market share.
However the big winners will be Ford and Toyota (assuming ford lasts) because once the big 4 in america lose Chrysler and GM, Toyota and Ford will be the ones picking up the slack.
I would also like to add that the major reason for the korean brands seemingly being less affected by the world recession is because their currency is rapidly depreciating. Thus if they sell the same number of cars in America for example, this will instantly convert into higher profits for them because of the exchange rate.
On the other hand the Japanese yen has skyrocketed (see: www . x-rates.com/d/USD/JPY/graph120.html for example) and thus the drop of sales in USA is amplified in terms of its impact to profits.
Getting pleasure from their misfortune? Yeah probably.
Once KIa/Hyundai have a decent range of vehicles and prove themselves I think Toyota has reason to be concerned.
Ford and VW will also come along.
Anyway, Toyota have been calling the tune and asking what they want for their vehicles and this domination of the market clearly isn’t good for the consumer. Good to see Koreans taking it up to them. Will take more than five years though.
Ironic really as I remember Toyota first selling the Corolla,Corona and Crown in Australia in the late sixties,early seventies offering more fruit than the locals to win sales.Also remember them being dynamically challenged compared to everything else at the time.Overall the Corona of the late seventies 76 to 79 18r motor?(when your heart says Europe but your head says Japan) was probably the best Toyota ever made in terms of durability and quality and established Toyota in Australia.Early Crowns and Corollas were duds for various reasons.
As for the Landcruiser building the Snowy mountains scheme more hype.Landrover was the true workhose of choice during that period.
Totally agree Wheelnut on the “Schadenfreude” comment.
Wheelnut Says:
February 7th, 2009 at 8:05 pm
Whilst GMs loss maybe $39bn.. it has been greater than that over previous years.. so technically speaking even though they are still in the red GM have been showing signs of improvement [thanks due to subsidiaries such as Holden and Opel]
Are you serious? You consider GM to be getting their act together as their loss was only 39 Billion dollars? Thats Billion, not million, what a silly comment. Also, I don’t believe Holden has made a profit in the last 3 or 4 years, I think you will find they are actually contributing to the losses not helping. Signs of improvemnt? WTF they are begging the US feds for another 5 billion on top of the 8 or whatever they got 2 months ago, what drugs are you on wheelnut?
Toyot is going to get hit hard, when you make 10 million cars a year and demand drops to possibly 8 million its a bit like the alamo, could be worse than projected yet.
Wheelnut Says:
February 7th, 2009 at 7:52 pm
Roflmatic: if a football team loses a game by 4 points or 40 points – they still lose don’t they?
Sure except in this case GM is not losing points, its losing taxpayers money, by the time the US is finished prob about 20 odd billion dollar, wheelNUT, you do know that a billion dollars is a whole lot more than a million dollars :)
I understand you guys want to annoy or payback on toyo supporters, fair enough, but GM is a farce and needs to be put down, enough is enough dont you think?
Does toyota spend money on R&D? They dont spend a cent on chassis & suspension & their stability control is Toys’R'us fisher price price knockdown stuff.
Must be buried somewhere in their Marketing budget I guess.
trackdaze Says:
February 8th, 2009 at 8:44 am
Does toyota spend money on R&D? They dont spend a cent on chassis & suspension & their stability control is Toys’R’us fisher price price knockdown stuff.
I agree that most of their range is pretty bland, serviceable is a word that comes to mind. As for R&D, how has that helped GM, Ford and chysler?
BTW, I love Fords range, some real quality and great design work there. Chrysler is a basked case, thats R&D dollars well spent, wouldn’t you agree?
As for GM, we have Barina, Viva, Epica in OZ, so I wouldnt say to much, not a lot of R&D dollars there.
As for the Falcon & VE, great cars, espc the omega from a bang for buck view(apart from the drivetrain and motor) but costs less driveaway than most mid size cars, unfort, rwd does not have a business case anymore at either of these companies, so there goes a lot of r&d dollars from an Oz perspective.
“Signs of improvemnt? WTF they are begging the US feds for another 5 billion on top of the 8 or whatever they got 2 months ago..”
I am sorry, that should have been 13.4 billion originally, and now they want another 13 billion, losing track of all these billions :)
Wagoner might as well nuke GM.
Oh what a loss allright.
Is this what eating whalemeat and Tofu to excess does to you mr Executive Vice President Mitsuo Kinoshita?
Toyota has now paved the way to be potentially grassed by Hyundai/ Kia.
Given this tragic news,
Please be advised that Dingo will be on sick leave until further notice.
Toyota has now paved the way to be potentially grassed by Hyundai/ Kia. ray vohnn Says:
February 8th, 2009 at 10:15 am
Glad you appreciate that Hyundai is their biggest threat, its certainly not Detroit anymore.
Goodluck to Hyundai.
I didn’t say that GM are getting their act together – what I meant was that as they are gradually reducing the amount of the losses which they have had over the past couple of years [a negative plus a positive equals a "lesser" negative - that is closer to zero] is why they are showing signs of improvement.
Going by their restructuring plans which were outlined in a statement relaeased late last year they intend to continue reducing the losses…. sure it won’t happen overnight but it will happen – eventually.
Sure GM have been given substantial amounts of money from the US Govt but since then they have spent most of it on projects from Holden and Opel – which indicates that not only have they finally realised the experience and expertise thier subsidiaries have to offer..
but also that they could be considering either reducing the scale of their operations or pulling out of the USA completely
Which is a possibility given that one of the conditions for the bailout is for the overpaid factory workers taking a pay-cut [from $40ph to $25ph] which according to the latest reports doesn’t look like happening
Things just keep getting worse for Toyota.
Quote “Moody’s Investor Services has lowered its credit rating for Toyota from the top-level Aaa to Aa1 and given it a “negative” outlook. Toyota had maintained Aaa status since 2003. The automaker, recently crowned as the largest in the world, is currently dealing with what must be the worst crisis that the Japanese company has ever faced since its inception in 1937. In what is decidedly uncharted territory at Toyota, the automaker saw its global sales fall by 4% last year and it is widely expected to post its first-ever loss – a whopping 150 billion yen ($1.65 billion) – over the full year ending in March. The worst bit of news, though, is that there’s no light at the end of the tunnel. Sales figures are not expected to improve in the coming months, which could very well lead to another loss next year according to industry experts”
Roflmatic – we are talking about Profits and Losses not Assets/Liabilities or Equity.
You are obviously a Toyo-phile as [like most of them] you have tried to change the subject.
Even though they are closely related there is a difference as Profits are Financial; Assets are physical and Liabilities can be considered to be virtual [as they can be adjusted etc with a bit of creative accounting]
GM and Chrysler may be in Financial trouble but at least they’re not spending Billions of dollars a year just to get their arses handed to them in [Farcical] Formula One.
Oh BTW Toyota are execting to record a $5bn Loss by march
[a negative plus a positive equals a "lesser" negative - that is closer to zero] is why they are showing signs of improvement.Wheelnut Says:
February 8th, 2009 at 10:39 am
Actually it equals a loss of 39 billion dollars in this case, not sure what the hell you are trying to say here, which is probably a good thing for me. You see here’s the thing, people like you are talking about negs and pos and zero, its billions, BILLIONS, get it.
By the way, what do you think GM’s profit is going to be this financial year?
I actually think Toyota will report a loss closer to 8 billion dollars, where does this leave the likes oF GM?
NO, don’t tell me, minus 1 is your answer.
Sure GM have been given substantial amounts of money from the US Govt but since then they have spent most of it on projects from Holden and Opel – which indicates that not only have they finally realised the experience and expertise thier subsidiaries have to offer..Wheelnut Says:
Sorry, you just made that up, its BS, they are servicing debt, paying wages and health costs with it, week to week stuff, they ran out of cash in december, that is, they had no money, understand. RWD future dev has been killed pretty much by both Ford and GM so much for ongoing developement there. BTW,a billion dollars on the VE is chickenfeed in a global sense, dont talk Holden up tooo much mate. Please stop telling porkies.
“so technically speaking even though they are still in the red GM have been showing signs of improvement [thanks due to subsidiaries such as Holden and Opel]” wheenut
I see you ignored my reply to this comment, Holden has not made a profit in 3 or 4 years, the G8 has failed in the USA and rwd is dying, please do explain how Holden has helped GM, seriously, you need to stop BSING.
Axe here is an example to try and explain what i am getting at:
In 2006 a company records a $45bn Loss – that is a Negative
In 2007 they record a $6bn profit – which is a Positive
Therefore even though the overall result is a Negative of
[-$45bn + $6bn =] -$39bn. In 2007 they actually made an improvement didn’t they… I mean even you would be able to see that.. I made it as simple as i could for you.
Axe.Toyota have gone through something like 70 Billion dollars over the last few years and the kitty is dwindling.
Now they are having quality issues {one of their largest recalls ever this year already}and a huge market down turn. Lots of money was spent and now the bills are coming without the revenues to keep up.
So how you going to feel when Toyota put their hand out to the Japanese Government for funding like the rest of the worlds car companies ? I mean they did it to make the Prius didn’t they!
Sure GM have been given substantial amounts of money from the US Govt but since then they have spent most of it on projects from Holden and Opel – which indicates that not only have they finally realised the experience and expertise thier subsidiaries have to offer..Wheelnut Says:
Sorry, you just made that up, its BS, they are servicing debt, paying wages and health costs with it, week to week stuff,
Okay if I did make that bit up [which I didn't] – then it must be some sort of coincidence that immediately after the US Senate gave GM the money that they approved a number of projects both here and in Europe such as Holdens plans to build a small car – which their had been a lot of speculation about in the months leading up to the announcement.
I mean there’s nothing to say they had to spend all the money on servicing debt is there? – the money is also to help GM streamline its operations and plan fro the future.. and by aprroving these projects etc its obvious that Holden and Opel play a major part in their future unlike Pontiac or Hummer
They are stuill trying to come to some sort of agreement with the overpaid UAW factory workers in relation to their wages etc
incase you haven’t noticed this topic is about the Toyota company and their financial problems not GM – so you please try to stay on topic as required by the CA Code of Conduct.