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Toyota to report first operating loss in 70 years

Toyota vehicles fill a lot at Toyota of South Florida in Miami. Toyota on Monday announced its first operating loss since 1938.

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Toyota vehicles fill a lot at Toyota of South Florida in Miami. Toyota on Monday announced its first operating loss since 1938.

If misery loves company, Detroit's Big Three can welcome Toyota to the club.

The Japanese carmaker said Monday that it would report an operating loss for the first time in seven decades, underscoring the breadth of the auto industry's woes amid the global economic downturn — and proving that even an envied giant such as Toyota can make mistakes.

"It speaks volumes about the severity of the recession," said George Magliano, an industry analyst with IHS Global Insight. "Nobody's immune, and everybody's taking a hit right now."

Tight credit markets and slumping economies are keeping consumers out of showrooms and making it tough to find financing for those who do want to buy. Sales of cars, pickup trucks and sport utility vehicles plummeted almost 37 percent in the United States last month compared with November 2007 — the worst monthly drop since January 1982. Toyota's U.S. sales — the carmaker's largest single market — fell 34 percent last month and are down more than 13 percent this year.

"The change that has hit the world economy is of a critical scale that comes once in 100 years," Toyota president Katsuaki Watanabe said at a news conference in Japan.

The Japanese automaker said it would post an operating loss of $1.66-billion for the fiscal year ending in March. Toyota still expects to record a net profit of $555-million for the current fiscal year, just a fraction of last year's profit of about $16-billion.

Operating profit reflects the financial performance of a company's core business, before taking into account costs such as income taxes and interest payments. Toyota said it hadn't recorded an operating loss since it started reporting such results officially in 1941.

Besides slumping consumer demand, Toyota and fellow Japanese automakers Honda Motor Co. and Nissan Motor Co. have been battered by a soaring yen.

That raises the cost of importing vehicles into the United States, although the higher prices aren't necessarily passed on to buyers, further hurting the automakers' profits.

But Toyota, whose management techniques, inventory systems and technological advances have been the envy of the industry for years, also has been a victim of some miscalculations.

Over the summer, for instance, a shortage of batteries crimped supplies of its Prius hybrid just when gas prices and demand for the fuel-efficient hatchbacks were peaking.

Watanabe also reduced the forecast for the number of vehicles Toyota expects to sell globally this year to just below 9 million, down 4 percent from a year ago. And in a departure from previous years, he gave no goal for vehicle sales for fiscal 2009.

Toyota probably will reduce its dependence on North America, the automaker's largest market with one-third of its sales, and focus more on emerging markets such as Brazil and China, said one analyst.

Toyota to report first operating loss in 70 years 12/22/08 [Last modified: Thursday, November 4, 2010 2:17pm]
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