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Toyota’s Net Profit Rises 32%
On Strong Sales, Weaker Yen
By AMY CHOZICK
August 3, 2007 7:48 a.m.
TOKYO — Toyota Motor Corp., shrugging off an overall slowing of demand in the key U.S. market, posted a 32% rise in net profit to reach a record high in the fiscal first quarter.
Japan’s No. 1 car maker by sales volume said demand for its fuel-efficient vehicles and luxury Lexus line boosted sales in all of its overseas markets. That led to a record net profit of ¥491.54 billion ($4.12 billion) in the April-June quarter, up from ¥371.50 billion a year earlier. Operating income grew 32% to ¥675.4 billion. Revenue rose 16% to ¥6.523 trillion.
The profit rise came in spite of what analysts have called the slowest annual growth rate for auto sales in the U.S. since 1996, due to high gas prices, declining home values and other factors that deter consumers.
But customers continued to flock to fuel-efficient models such as the RAV4 crossover and the Prius gasoline-electric hybrid. Toyota says it sold 762,000 vehicles in the region, up 2% from last year.
“We’re not expecting the U.S. market to go down substantially,” Takeshi Suzuki, a Toyota senior managing director said at a press conference Friday.
Toyota also did well in the crowded pickup truck market, where it had a rough start. Taking a cue from its Detroit rivals, it offered discounts of as much as $3,500 on its redesigned Tundra full-scale pickup. The incentives helped boost sales, but accounted for a significant chunk of its ¥100 billion world-wide marketing budget. The company says that the high-margin Tundra brings in robust profits despite the incentives, and significantly contributed to a 14% rise to ¥160.2 billion in operating profit in North America.
The weak yen, which increases the value of overseas earnings when converted into the Japanese currency, also contributed to the rise in profit in North America.
The U.S. push by Toyota and other Asian auto makers has won them market share at the expense of American makers. Earlier this week, analysts reported that combined market share for the big Detroit brands, including Chevrolet, Ford and Chrysler, in July fell below 50% for the first time.
Honda Motor Co. said last week that demand for fuel-efficient cars in the U.S. boosted its quarterly profit. Nissan Motor Co., meanwhile, reported a drop in profit due to a backlog of big, gas-guzzling vehicles that it can’t sell in the U.S.
Toyota has also been rapidly expanding in fast-growing emerging markets such as China, India and Russia. In Asia (excluding Japan), its sales increased by 13% to 222,000 vehicles, driven largely by a brisk sales in China and Indonesia.
World-wide, the company sold 2.16 million vehicles in the quarter, up 3% from 2.091 million last year. The rise will help Toyota meet its goal of selling 8.89 million vehicles in the year ending March 31, 2008, and possibly inch beyond General Motors Corp. to become the world’s biggest car maker by sales volume this calendar year.
Toyota, valued at $215 billion, is already the world’s most valuable and profitable car maker. One weak spot for Toyota was Japan, where sales fell 8% to 500,632 vehicles. New car sales have been consistently declining in Japan, due largely to an aging population.
As Toyota expands, it must confront problems with quality control and production. In 2005, the car maker recalled 2.38 million vehicles in the U.S., slightly more than it sold, due to quality problems. It has since delayed introducing new models by as much as six months in order to work out engineering and design kinks.
After an earthquake damaged one of its key suppliers last month, Toyota had to shut down production at 12 of its plants in Japan for several days, resulting in a loss of output of 60,000 vehicles. The company says it will make up for the loss during holidays and that it will not have an impact on earnings.
Toyota kept its annual forecasts for the fiscal year ending March 31, 2008. It predicted a net profit of ¥1.650 trillion, up 0.4% from ¥1.644 trillion, and a group operating profit of ¥2.250 trillion, a 0.5% rise.
Write to Amy Chozick at firstname.lastname@example.org