Toyota Projects First Full-Year Profit Drop in 7 Years

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Toyota said the strong yen and weaker U.S. sales took a bite out of January-March earnings and projected worse was to come — a 27 percent plunge in its full-year profit.

Toyota President Katsuaki Watanabe said the automaker is facing a "severe business environment."

(AP Photo)
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It would be the first drop in full-year profit in seven years for the automaker.

The results and outlook released Thursday highlight how the tough North American auto market is hammering profits. Meanwhile, unfavorable currency swings added to a growing list of problems for Toyota Motor Corp., including soaring material and energy costs and a stagnant auto market in its home market of Japan.

"There is no mistake that things are seriously tough — even for Toyota," said Tsuyoshi Mochimaru, auto analyst at Lehman Brothers in Tokyo.

Still, the company appeared to be faring better than its American rivals. GM lost $3.3 billion in the first quarter. Ford had a surprise profit of $100 million for the same period but expects to lose money this year as the U.S. auto market deteriorates.

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Honda Motor Co., Japan's No. 2 automaker behind Toyota, said last month that its January-March profit declined 86 percent compared with the same period a year ago because of a corporate tax levied on its Chinese joint venture. Nissan Motor Co. reports earnings next week.

For the fiscal fourth quarter, the automaker reported a 28 percent drop in net profit to 316.8 billion yen ($3.05 billion). It was the first decline in quarterly profit since April-June 2005.

Sales rose 3.8 percent in the most recent quarter to 6.567 trillion yen ($63.14 billion).

Toyota had been on a roll with the success of its fuel-efficient models, including the Prius and the Corolla subcompact, which have gotten a boost from rising gas prices.

For the fiscal year ended March 31, Toyota racked up record profit of 1.72 trillion yen ($16.54 billion) — up 4.5 percent from the previous year. That was in line with the projection Toyota gave in February.

Annual sales grew 9.8 percent to 26.289 trillion yen ($252.8 billion), also a record for the company.