Toyota loss balloons to US$8.6 billion
May 9, 2009 by David Twomey
Showing that even the apparent mighty are not immune in the current financial times, the world’s biggest car maker, Toyota, has forecast a much bigger than expected loss of US$8.6 billion.
Toyota Motor Corporation, announcing its latest results in Tokyo, said it would also sell about one million fewer vehicles this year, leaving it desperately trying to cut costs in the grip of a severe market downturn.
The global crisis that has battered demand for cars and pushed US rival Chrysler into bankruptcy has hit Toyota hard, reversing its rapid expansion into overcapacity almost overnight.
Reuters Newsagency says that currently dozens of Toyotas factories stand half idle.
The Japanese giant posted its first-ever consolidated operating loss last year after a record profit the year before.
For January-March, Toyota piled up a $6.9 billion loss, in line with most estimates, and cut its annual dividend by nearly 30 per cent, the first cut since at least 1994, when it changed its reporting period.
While the entire industry is caught in the slump and seeking to offload cars piled up in stockyards, Toyota has been especially vulnerable due to its exposure to the United States and Japan, where sales have plunged to unpredicted lows.
Reuters says that even in China, where the market has risen, Toyota has bucked trend with a fall so far this year.
“Toyota’s outlook was worse than I’d expected. The company expects a really tough time for the first six months,” Reuters quotes Naoki Fujiwara, a fund manager at Shinkin Asset Management, as saying.
“I expect the bottom for the auto industry is the April-June period, followed by a slow recovery.”
Toyota President Katsuaki Watanabe was more downbeat, stopping short of predicting when sales would pick up in major markets, or when the company would return to profitability, as it remains saddled with excess capacity.
In a rare Toyota admission of failed decision making he told a news conference: “Of course the external environment doesn’t help, but we were lacking in the scope and speed of dealing with various problems and issues, and for that I am sorry.”
For the year to next March, the maker of the Prius hybrid forecast an operating loss of 850 billion yen, more than double the average forecast in a survey of 20 analysts by Thomson Reuters.
The bleak forecasts prompted ratings agency Standard & Poor’s to downgrade Toyota’s long-term debt ratings to AA from AA+, with a negative outlook.
Toyota said it expected its global sales, including subsidiaries Daihatsu and Hino but excluding cars sold by joint ventures in China, to fall about 14 per cent in 2009/10 to 6.5 million vehicles.
Mr Watanabe said that would knock 800 billion yen off the operating level this year, which Toyota aims to offset with cost cuts.
To return to profit, Toyota must sell more cars or cut costs further, Mr Watanabe said. But he predicted the US market would be around 10 million vehicles at best this year, down from more than 13 million in 2008.
Toyota is hoping the launch this year of a third-generation Prius will ease some of its sales slide and production cuts, even though it is cutting the price of the popular model to bring it closer to Honda’s new Insight hybrid, meaning its contribution to profits would be smaller than planned.
Domestic rival Honda Motor Co last week forecast a small profit for this year thanks to its relatively healthy motorcycle business.
“Compared with Honda, Toyota has a lot of larger models and a lot of excess capacity globally,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
“By 2010, cost cutting and capacity reduction may be taking effect, so they could break even then.”
Print it: 
Farmers have this thing called averaging, where they average their income over 5 or 7 years to work out how much income tax they should pay. This allows for drought and bumper years to be smoothed out.
I daresay the Toyota average income over the last 5 years and the next 5 years will still be a profit.
It’s great to see that Honda has forced them to stop gouging with the price of the Prias, but having said that, those who are gullible enough to think they are saving the planet by buying a hybrid deserve to get fleeced.
What’s the bet that clean rubbish disposal is one of the things to be pruned in the cost-cutting……..
As this article says, Toyota was particularly vulnerable to the slump in sales because unlike GM, Chrysler and Ford, Toyota were expanding production just before the crisis hit, whereas the others were already in the process of downsizing production to meet lowering sales.
Still, shows Toyota aren’t the magical, utopian style manufacturer that many people think they are.
We will see what happens in Q2. Hopefully Toyota President Katsuaki Watanabe prediction of a quick recovery for the industry comes true!
Whats more is that Toytoa has spent so much in trying to get into every market niche with only moderate success (comparatively) that they will still be suffering after people like Ford are back ontheir feet.
Vehicles to point at are Tundra, Prius and Lexus. Tundra hasn’t scratched the surface of the pick ups market. Prius is being out performed by Fusion and Insight, and Lexus (whilst selling some vehicles) aren’t getting close to changing the semi luxury and luxury global markets. However billions of dollars have been spent on R&D and marketing.
I love how you have included the logo with “oh what a feeling” OUCH!
A minor blip on the road to world domination?
Maybe not.
They will over-react to this, cheapen their cars even more and make them even more conservative. In the process they’ll give their market away to Hyundai, Honda and Mazda as they strive to become the new GM.
Captain Mainwaring…
I’m not sure if you have studied Toyota much, or know much about them… the Japanese comnpany that is..
Before it was Hyundai the next Toyota… now Toyota the next GM.
First off, Toyota’s company structure is no way near like GM. The employee/compensation issue doesnt exists also.
Second as pointed out by the article briefly, Toyota has experienced massive expansion the last 5-7 years.
This brought 2 issues… rapid expansions created quality issues as production volume increased dramatically, new plants were established and new assembly lines created… Toyota’s president is aware of this and had this as number priority to be “fixed” within the next year or 2.
Unfortunately, the crisis happened and now the over expansion, high volume of production etc they all contribute to the massive loss.. again as pointed out by the article..
its a case of bad luck…
Toyota is just a manufacturer afterall and as all, affected by low demand high supply issue.
The next president has already have plans to “change” Toyota, sighting Mazda, Honda, Nissan etc as over taken them in terms of “interesting” cars…
Toyota isnt ran by americans like GM.. and isnt even near structured like them….its almost ridiculous.
And who wants to be like GM?
Its incredible you’d post that…
Aki, you seem to be presuming a lot. I have probably studied the world car industry for a lot longer than you have. I would have thought that Toyota has experienced massive expansion for the last 50 years, not just the last 5-7 years.
This is nothing about company structure, compensation etc., and of course nobody (not even Toyota) wants to be like GM is now.
The point is, that Toyota suffers from excess bigness. ie. huge, as in ‘hard to turn around’, ‘inflexible’, ‘hidebound in bureaucracy’. Like GM was in the sixties when they assumed that they could continue to prosper on their own momentum.
I know Toyota is smarter than that, but the pure fact that they ended up with far too much capacity and too many boring models proves my point.
This is a well-needed reality check for Toyota!
Here here Captain, go VAG.
I have a theory that part of the reason is that the old people thay used to buy Magnas and migrated to Camrys/corollas arent buying cars in the present climate. I can see the private market for Camrys/corollas bottoming out.
In the words of The Fact/SOB, but twisted around, the less old, oblivious, bad (eg. dont know the road rules) drivers on the road, the safer the community.
I guess the positive side to this story is that they still expect to be around next year in the same form just not with the same amount of money.
Plus old people tend to die, which means no repeat customers. Another nail in Toyotas coffin.
falcodore, when a under 25yo wraps there commodore or falcon around a pole there is no repeat customers aswell!
Yes, true Mark but young people (if they survive) buy new cars throughout their lives (unlike old ppl who die).
Thats where Toyota will fail unlike companies like Mazda etc who market to younger ppl while not offending the older generation.
Toyota appeal to older ppl, i see it every day unfortunately.
Falcodore, young people if they survive, become old and then become Toyota buyers. Therefore there will be a customer base for Toyota forever.
Oh and another thing. Demographers are constantly telling us that the population is ageing. This can only mean there will be more Toyota’s on our roads.
Spitfire, people are creatures of habit, so hopefully they keep buying Mazdas, Fords etc we wont have to worry about so many bad drivers.
But if they do buy Toyotas then D’oh!
I’m gettin older every day Spitfire, but be buggered if i’m gunna buy a Toyota.
Just convinced my brother to go from Toyota to Mazda so maybe there’s hope yet.
They need to get some “soul” back into their cars.
@ Falcodore
“…the less old, oblivious, bad (eg. dont know the road rules) drivers on the road, the safer the community.”
You could also say the less young drivers on the road the better too. I worked for just under 6 years as a Paramedic and although there were a few, I rarely attended crash sites that involved ‘old’ drivers. I can’t tell you the number of sites I attended that featured younger drivers including a large number of probational licensees, but it was usually the case on a call out.
Also I did attend quite a few accidents involving sales reps. Go figure.
The community would benefit from better, safer drivers in general, not just less of those that fit into an age demograph.
True Andronicus, young ppl tend to take a lot more risks. But older ppl (mostly Toyota, Magna drivers) should know the road rules better. And i see a lot more older, Toyota drivers doing stupid things than younger drivers.
AS ive asked my mother, who thinks she is a good driver cause she hasnt had an accident (and drives a Corolla). Have you ever looked in the rearview mirror to see how many accidents you’ve caused?
By the way, she isnt a good driver. shes too scared to drive into town let alone on the open road.
Falcodore, you are the reason some people support selective breeding.
You state your brother is old, because he is/was a toyota owner (now Mazda) so he automatically changed from an old person to a young one, did he?
My mother is 80, and drives a Mazda, and is about to buy another Mazda.
For you education, since you are clearly not educated, the rule is this – It takes only ONE exception to disprove a theory, even if there are thousands of examples that might support it.
Since my mother is old, and buys cars you theorise are for young people (Mazda), your theory is disproven.
Another loss for Toyota; this could change their plans in relation to the number one thing thats making the biggest loss for them… their under-performing F1 team.
That is they may pull out of F1 and decide go back to a WRC which they used to dominate and were world champions
Mind you a number of car manufacturers have either pulled out or are thinking of pulling out of WRC [factory backed teams] so it be that Toyota are the only ones in WRC
I just hope that toyota use the simple method of making their cars cheaper to move some stock. They are notoriously difficult to get a good deal out of. Plus, their range is hardly class leading these days so they needn’t be price leaders. A 10% price reduction across the range would do wonders for their sales. And I bet they would still turn a huge profit.
“wheel nut” as usual you talk about things you clearly have very little knowledge about! how is coming 3rd only 1 point behind red bull racing in f1 under achieving? under achieving is merc on 13 points and bmw on 4 “thats right 4 points”! this is only a flesh wound to toyota with every one making a loss toyota could do this for 5 years and still only be using there petty cash tin!
Figjam relax. You can’t argue that Toyota’s participation in F1 has been so far underwhelming. They have been the highest spending team for the past 7 years, and yet have only just started to consistantly get points, massively helped by their (now successful) interpretation of the FIA rules on diffuser design. Now that the other teams have nearly caught up, they will slip back down the team points ladder. Ferrari’s new diffuser and aero package is noticeably faster, as seen by Massa’s performance over yesterday, Brawn is faster, Red Bull is faster, and now Williams have some serious pace as well.
You are right, Toyota had a massive mountain of cash, this result while poor isn’t threatening their existance. But Toyota have also shown in the past to be very intolerant of losses, and it was heavily hinted by Toyota execs at the start of this year that if they don’t win one race, Toyota would most likely pull the plug on F1. This loss, being larger than they were expecting, will probably make that more likely.
Reckless1, when did i say my brother was old? Thats right i didnt!
If you actually bothered to read and comprehend my comment YOU might actually learn something.You are obviously the one who needs educating, but judging by the usual tripe you sprout on about on here i doubt that would be possible so maybe euthanasia would be a better option for you? ;)
By the way, i was only using Mazda as an example because when it comes to bad drivers and the brand of car they drive, Mazda consistantly rate near the bottom, whereas Toyota consistantly rate at or near the top. Had nothing to do with age demographics Theres some education for ya…mate!
Toyota can fix there cash flow problems by “Changing The Game”,the same thing they did with the Aurion to make it the best selling large car in Oz.
FIGJAM I wasn;t talking specifically about the current season – Toyota have been competing in F1 for the last 6 years yet they haven’t been able to win a number of consecutive races let alone a championship despite the fact that they have an annual budget thats bigger than BMW McLaren and Ferrari Combined.
I mean given that Toyota [and their fans] have always had the idea that they can enter a new market and completely dominate that particular sector showing their more established / experienced rivals how its done…
why haven’t they been able to do it in F1.
With all the money time resources and trchnology that they have put into it surely you would expect it to have resulted in somethinhg motre than a solitary podium finish?
oh really …skip skip skip,lalala ,Im going to have a really good mothers day after reading this!
Figjam/Sick of Boagans and any other aliases you want to go under………Toyota arent moving forward they are going backwards and that flesh wound is developing into a large gash in their money bank! How much money has Toyotas bank account gone backwards in the last 18 months?
Quote “Toyota is hoping the launch this year of a third-generation Prius will ease some of its sales slide and production cuts, even though it is cutting the price of the popular model to bring it closer to Honda’s new Insight hybrid, meaning its contribution to profits would be smaller than planned.”
pffffffffffttttt banking on one car thats too expensive not as well built as a Honda or its reputation,Im guessing this will be the start of many more losses announced for Toyota for the year !
Americans havent got any money Toyota or havent you realised that yet! They want bargains not over priced white goods at the moment.
^ Lol.That comment suits your username really well.;)
Toyotas suffered several of the indignities that other car firms have faced for the last two years.
The No.1 auto firm in the world lost money in the last quarter, a total of $6.9 billion. S&P cut the company’s rating. Toyota cut its dividend.
Toyota also forecast that its loss for the next fiscal year could be more than $8 billion.
The announcements highlight the fact that superior products, marketing, distribution, and a strong balance sheet do not mean much when an industry goes into a flat spin. Toyota is now at the mercy of the global recession as much as any other of its well-run and well-financed peers. As rivals like Fiat and VW get stronger, Toyota may actually lose some of its advantages as the worldwide economy recovers.
Toyota’s capital position will keep it afloat, but, like every other car company with global operations, it may take years for its earnings to recover.
Falcondore – Like a Prius on an interstate expressway,late at night,mixing it with Interstate bound semis.
If they want to cut costs DROP THE F1 TEAM,$400mil a season for what ? ? ? ? ?
They should enter the Liechteastein national rally championship,competion is fearce.Im sure they could enter and develope a car thats lightyears ahead of the locals so they can win,it would be a new challenge for them.
Ever seen a prius do a burnout,I have,It smelt like a fanheater full of dust.
now! now! bm i was waiting for your backup support of wheelnut can’t he fight his own battles? regardless of what you say toyota always will be the no1 choice of millions of people around the world, as i said this is only a flesh wound in the giant sumo warrior!
oh and wheelnut i am the first to say about bloody time toyota in f1 starting doing something,but they have now!! what they spend on f1 is a only a drop in the ocean to them!
oh and bm its amasing how well those “white goods” sell isn’t it? WHAT MARKET SHARE DOES TOYOTA HAVE IN AUSTRALIA but then again they are the BEST in the world!!!!!!!!!!!!!!
Sick of Bogan /Figjam/
Quote ” toyota always will be the no1 choice of millions of people around the world, as i said this is only a flesh wound in the giant sumo warrior! ”
Says who, you ? pfffffftttt your confusing fact with fiction ricer boy!
Bigger they are the harder they fall , *TIMBER* Toyota !!!!!!!!
Sick of Bogans/ Figjam ……….do you have a dictionary at your school ? Perhaps you should bring it home with you next time if you want to try blogging with the adults… :)
Isnt it ironic that its taken over 50 years for Toyota to become the most popular car company in a number of markets in a number countries including Australia.
Yet at the same time the number of recalls [worldwide]relating to Toyotas have also increased.. to the point where they are on the verge of overtaking Ford and GM-H
Mind you; the thinner you spread your resources the more you sell the more likely you are going to have mechanical problems and build quality issues – which unfortunately got Toyota are the two main things their reputation is built on
No that’s not ironic at all. You may do well to look up the term.
Are you saying that the drop in profits is to do with Toyota’s build quality Clive?
If you were given a multiple choice question what has caused Toyota’s drop in profits:
A) Decline in build quality and mechanical problems
B) Global financial crisis
Would you answer A?
good i hit a nerve bm! sorry about the spelling i think AL has set in,by the way how’s bmw going in f1??????????????
Figjam,
Let me answer your question.
Shithouse
Your not smart enough to find a nerve Sick of Bogans/Jammed your Fig ,so dont give yourself any credit.
Its the start of F1 for the year so lets see how the rest of the season ends up for them,either way they’re way ahead in previous wins to Toyota :)
I can goggle their accomplishments in Motorsport for you if you like, Toyota are the masters of White goods BMW the masters of engines,nuff said!
No I’m not saying that Toyota’s losses are entriely due to the steady decline in the level of build quality or the increase in the number of recent recalls involving Toyotas. However; they are a contributing factor.. Particularly when Toyota give their customers half-arsed excuses/solutions.
quote
10 May 2009
Toyota is prepared to walk away from Formula 1 if the FIA pursues its controversial budget cap initiative from 2010 onwards, claiming that a two-tier system ‘is not the right direction’ for the sport to be taking, makes no ‘common sense’ and ‘would make a huge number of people redundant’.
I read a similar article on Autoblog a couple of days ago.
Yet again seems that Toyota are reluctant to compete in motorsport unless the governing bodies make changes to the rules which [specifically] suit Toyota.. Just as they did with V8 Supercars.
Toyota [and their fans] tried to make people [who don't know anything about V8 Supercars] think that the V8s rules and regulations are too restrictive just because AVESCO said No to the rule changes that Toyota demanded..
Yet they were more than willing to accept the rules and regulations laid down by Bernie Ecclestone and the FIA – However; it appears that that soon could change.
If Toyota were as superior as we are lead to believe; then surely they would be able to adjust to the changes and still manage to be competitive let alone win a race..?