Toyota, which makes Camry sedans and Prius gas-electric hybrids, said that its profit had fallen 19 per cent to 80.4 billion yen, or $1 billion, in the July-September quarter. It said a surge in the yen, which nervous global investors consider a haven, weighed on overseas profit. Sales for the quarter fell 4.8 per cent to 4.6 trillion yen, or $57 billion, the company said in a statement. The uncertainty pushed Toyota to withdraw its forecast for the financial year ending in March to give it more time to assess the damage from the Thai floods, which have taken a humanitarian and economic toll on the Southeast Asian manufacturing hub. Toyota had said it expected to earn 390 billion yen in the year.
Biggest automaker
The problems seem likely to knock Toyota out of the spot as the world’s biggest automaker, and push it behind General Motors and Volkswagen, which have been able to fill a void left by Japanese automakers since the natural disasters in Japan in March.
Combined production at Toyota, Honda, Nissan and other Japanese carmakers fell by one-fifth from April to September, according to the Japan Automobile Manufacturers Association, after the earthquake and tsunami ravaged plants and severed production lines, forcing factories as far away as the United States to reduce output.
But just as Toyota had started to restore production, flooding in Thailand again forced the company to halt work at its plants. Three vehicle factories in Thailand have been closed since early October, while a shortage of parts has caused Toyota to limit production at factories across the world, including in Japan and the United States. Toyota said that production would remain below normal in Japan until at least next week. The company predicts production will have fallen by 150,000 units by mid-November.
A strengthening of the yen to historic levels in recent months has taken a toll on Toyota’s earnings. On October 31, the currency reached a post-World War II high of 75.34 yen to the dollar, prompting the Japanese government to intervene in foreign exchange markets in an effort to weaken it. But the currency has remained stubbornly strong since the intervention, at about 78 yen to the dollar, and exporters are urging the government to do more.
A strong yen can make exports more expensive and therefore less competitive overseas, and erodes profit earned overseas when it is repatriated as yen. For Toyota, which still manufactures about 40 per cent of its cars in Japan, costs from the rising yen are especially damaging. It has said it remains committed to making about 3 million cars a year in Japan, although it sells fewer than half that many in a shrinking domestic market. Toyota exports the rest at a high cost, a system long criticized by analysts as unprofitable.
Satoshi Ozawa, an executive vice president of Toyota, on defended its insistence on keeping production in Japan. Exports remained vital to the Japanese economy, he said, and Toyota was committed to keeping manufacturing jobs in Japan. “Recent foreign currency levels threaten to undermine Japan’s standing as an exporter nation,” Ozawa said. He called on the government to “take resolute measures.”
Toyota would keep production in Japan as if “clinging to a rock with its teeth,” Ozawa said, drawing from a Japanese proverb. Toyota’s US depositary receipt shares fell 1.3 per cent to $64.61 on the New York Stock Exchange.
