Tokyo - Toyota, the world's largest automaker, sank into the red for the October-December quarter and acknowledged on Friday it was heading for its first net loss since 1950 because of plunging global sales and the strong yen.
Joining a string of Japanese companies that have slashed forecasts, Toyota said it expects a net loss of ¥350bn for the year through March.
That's a stunning reversal from the record ¥1.72 trillion profit the maker of the Prius hybrid and Lexus luxury car posted the previous fiscal year. In December, Toyota thought it would eke out a small annual net profit, but the outlook has darkened further since then, especially amid a dramatic contraction in the US auto market.
For the fiscal third quarter, Toyota racked up a ¥164.7bn loss, down sharply from the ¥458.6bn profit it had the same period the previous year, as the global slump squelched sales.
Quarterly sales plunged 28.4% to ¥4.8 trillion.
Toyota said the last time it had the equivalent of a net loss was in 1950, when it reported just parent results under different accounting standards than it uses now.
The damage was pronounced because Toyota had been on such an aggressive growth track in recent years, but the downturn came extremely suddenly, said Yasuaki Iwamoto, analyst with Okasan Securities in Tokyo.
Lower credit rating
"Toyota is having serious problems responding," he said. "It boasts a full and global lineup of products. But the world's auto demand changed in a flash."
And the company can't count on global sales picking up in the fiscal year through March 2010, and at best can hope to cut costs to minimise the damage, Iwamoto said.
Toyota, which last year overtook General Motors to become the world's best-selling auto company, announced no further job cuts Friday beyond the 3 000 contract workers it had earlier planned to trim.
Just a few hours before the earnings were released, Moody's Investors Service lowered its top credit rating of "Aaa" on Toyota by one notch to "Aa1," citing fears about its profitability.
Toyota's global vehicle sales for the October-December quarter shrank by 443 000 vehicles from the same period a year earlier to 1.84 million, as sales dropped throughout the world, including North America, Europe, Japan and other Asian nations, it said.
"Both revenues and profits declined severely during this period," executive vice president Mitsuo Kinoshita said of the latest quarter.
Conditions were especially tough in the US and Europe, and the rapid rise of the yen against the dollar, euro and other currencies, which reduces the value of overseas earnings, also hurt results, he said.
New models on the way
Toyota also lowered its global vehicles sales forecast for the fiscal year by 220 000 vehicles from its December forecast to 7.32 million vehicles. Now it expects ¥21 trillion in sales for the year, down from a record ¥26.3 trillion earned for the previous year.
The company also said its yearly operating loss will balloon to ¥450bn, worse than its earlier forecast for a ¥150bn. That would be the company's first operating loss in 70 years. Operating income measures earnings before taxes and other items included in net profit, and often gives a picture of a company's core business.
Until the US financial crisis erupted last year, Toyota had been on a roll, boosting rising profits for seven straight years, riding on the success of its fuel-efficient models.
The global slump and the rising yen have pummelled all Japanese exporters, including electronics makers Sony and Panasonic, which are both forecasting losses for the fiscal year through March.
Honda, Japan's second-biggest automaker, expects to stay in the black for the year through March at ¥80bn profit, although that's down 87% from the record ¥600bn the previous year.
Nissan, the nation's No. 3 automaker, reports earnings Monday. Smaller automakers Mitsubishi Motors and Mazda have already projected losses for the fiscal year.
Kinoshita promised Toyota will turn itself around through cost cuts and new products. He said Toyota continues to be committed to developing gas-electric hybrids as a pillar of its growth strategy.
He pointed to the third-generation Prius, set to arrive at dealerships in May, as well as the HS250h, the first Lexus model designed solely as a hybrid, scheduled for sale midyear, as models symbolising Toyota's future.
Last month, the company tapped as incoming president a member of the founding family, Akio Toyoda, an executive vice president, who at 52 is considered young by Japanese standards for heading a major corporation.
Toyota officials and analysts say he can help bring employee ranks, group companies and dealerships together during hard times because he has the special charm of a Toyoda.
Toyota shares rose 1.6% to ¥3 050. Toyota announced earnings after trading ended in Tokyo.