Toyota Motor Corp is relying on deeper cost cuts and a government-backed sales boost as it forecasts a slightly shallower annual loss, underscoring doubts over a sustainable recovery in demand.
Toyota, the world's biggest automaker, slipped to its third quarterly loss in a row as sales sank in Japan, Europe and the United States with job losses mounting and credit still tight, and expects to lose a record $7.9 billion this business year.
While the global downturn is hammering automakers everywhere, Toyota's results contrasted with surprising first-quarter profits at domestic rivals Honda Motor Co and Nissan Motor Co.
"Toyota lowered its loss forecasts, but it booked a loss for April-June. That is slightly unsatisfactory, compared with Honda and Nissan, which turned profitable for the period," said Fujio Ando, senior managing director at Chibagin Asset Management.
Toyota lifted its global vehicle sales by 100,000 vehicles to 6.6 million on the back of rising demand in Japan, where the government is offering generous incentives on hybrids, but it remained cautious on sales elsewhere.
"Demand is being supported to a large extent by government schemes, and it's difficult to get a read on how much this will translate into a fundamental recovery in demand," Senior Managing Director Takahiko Ijichi told a news conference.
A "cash-for-clunkers" scheme introduced in the United States helped limit Toyota's U.S. sales drop to 11 percent last month, but Ijichi said he would gauge performance over the next two months before deciding on any revisions to its sales forecast for the region.
Toyota's production is gradually picking up, most notably to assemble more of the Prius hybrid car, for which customers in Japan are waiting at least eight months for delivery.
But Ijichi said output was being held back by a shortage of batteries to run the vehicles, and the company was considering expanding capacity. Toyota's battery venture with Panasonic Corp has so far announced plans to double capacity to about 1 million units a year by the middle of 2010.
MORE COST CUTTING
For the year to March 31, 2010, the maker of the Corolla and Tundra forecast an operating loss of 750 billion yen ($7.9 billion) and net loss of 450 billion yen, better than its projections three months ago for losses of 850 billion yen and 550 billion yen, respectively.
But its estimates are much more conservative than a consensus operating loss forecast of 467 billion yen, according to a poll of 22 analysts by Thomson Reuters, prompting speculation further revisions could follow.
Toyota raised its cost savings target to 900 billion yen from 800 billion yen, through steps such as accelerating measures to eliminate quality-related costs and cutting labour costs through work-sharing.
In the April-June quarter, which saw two U.S. automakers succumb to bankruptcy, Toyota made an operating loss of 194.9 billion yen ($2.04 billion). That compared with a profit of 412.6 billion yen a year earlier and a consensus loss estimate of 326 billion yen in a survey of five analysts by Thomson Reuters.
Toyota lost a net 77.8 billion yen, swinging from a profit of 353.7 billion yen in the first quarter a year ago. Revenue declined 38 percent to 3.84 trillion yen.
Profitability could improve in North America, where Toyota is preparing to dissolve a loss-making plant in California that it ran with General Motors before the U.S. automaker left it behind in bankruptcy with Motors Liquidation Co.
A liquidation would likely result in a one-off loss, but it would help Toyota in the long run by raising the rate of capacity utilisation at its other North American factories, analysts said.
Shares of Toyota have gained 37 percent in the year to date, against a 17 percent rise in the benchmark Nikkei average.
Before the results were announced, Toyota ended down 1.5 percent versus a 0.2 percent rise in the Nikkei. ($1=94.92 Yen)
