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."