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Toyota profit hit by Thai floods

Tokyo - Toyota Motor Corp withdrew its full-year profit outlook on Tuesday as Thai floods pose a fresh threat to production just as it was recovering from supply shortages that battered profits after the March earthquake in Japan.

Japan’s largest automaker reaffirmed its commitment to manufacturing in Japan despite the weight of a stubbornly strong yen that makes its exports unprofitable and less competitive against cars from rivals such as Hyundai Motor Co.

Toyota has been particularly hard hit by Thai flooding, along with Honda Motor Co, which also withdrew its earnings guidance. Toyota’s three vehicle plants in its Southeast Asian export hub have been forced to halt work from October 10 until at least November 12 and a shortage of parts has also forced it to cut output in nine other countries, including Japan.

Once the world’s most envied and profitable automaker, Toyota has lost its shine against domestic rival Nissan Motor Co, which Toyota admitted on Tuesday may have proven more adept at dealing with supply-chain issues such as those triggered by the Thai floods.

“I can’t deny that Nissan may have done some things right, given the outcome of how they recovered from both the earthquake and the floods,” Toyota’s chief financial officer, Satoshi Ozawa, told a news conference. “If there’s something there to learn from, we’d like to do that.”

Nissan last week lifted its profit forecasts as it achieves strong sales growth in developed and emerging markets with popular new models.

Toyota said its operating profit for July-September was ¥75.39bn ($966m), worse than an average estimate of ¥101.3bn in a Reuters survey of 12 analysts. Second-quarter net profit was ¥80.42bn, down 18.5%, while revenue fell 5% to ¥4.57 trillion.

Withdraws forecasts

Toyota withdrew its forecasts for profit and vehicle sales for the year to March 31 2012, citing uncertainty surrounding the Thai flooding.

It had forecast an operating profit of ¥450bn three months ago, against a consensus forecast of ¥486bn in a survey of 21 analysts by Thomson Reuters I/B/E/S.

Toyota said the Thai calamity would force it to keep its Japanese production reduced at least until November 18. It was still undecided on production elsewhere, including in Thailand.

Between October 10 and November 12, Toyota will lose production of about 150 ,000 vehicles from the supply shortage, it said. This week its Japanese factories were working at 70% to 80% of planned levels, while output in the Philippines, Malaysia, Indonesia, Vietnam and Pakistan was at 40% of plans.

Its North American factories, excluding Mexico, were working at 90% of plans.

Toyota had just started to ramp up production in September, working overtime and some weekends to make up for output lost after the March 11 disasters in Japan.

The supply constraints from the two disasters have hit Toyota’s sales and market share the world over and will likely place it behind General Motors Co and Volkswagen this year. Toyota is still by far the most valuable, with a market capitalisation of $113bn.
But the setback could be short-lived, analysts said, since unlike Honda, its own factories in Thailand were not affected.

“In assessing the impact of the Thai floods on Toyota, we’re talking about the people that supply their parts, rather than Toyota itself,” said Koji Endo, senior analyst at Advanced Research Japan in Tokyo. “So this disaster looks to be a short-term setback for them rather than a long-term one.”

On Tuesday, Ozawa gave three detailed steps Toyota hopes will help to offset currency losses and keep its commitment of building at least 3 million vehicles annually in the shrinking Japanese market without bleeding profits.

It aims to sell more vehicles in Japan, bringing the ratio of domestic sales to exports from around 1.7 million to 1.3 million now, to 1.5 million each. It will also try to reduce the number of engines and transmission units it ships out of Japan, and will redesign components to allow its suppliers to use more materials in local markets outside Japan.

Toyota’s shares have fallen 22% in the year to date, faring worse than Nissan which is down about 8%, but better than Honda which has fallen 28%.
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