Toyota Motor reported a second-quarter 69 per cent plunge in net profits and warned it would barely make money in the second half owing to falling U.S. and European vehicle sales and a debilitating surge in the yen.

The downturn at the industry’s perennial top earner was much sharper than analysts had expected and underlined the depth of the crisis in the sector as the credit crunch turns into a potentially long-lasting economic slump.
“This environment is more severe than anything we have ever experienced,” said Mitsuo Kinoshita, Toyota’s executive vice-president, who added that profits were likely to remain at depressed levels next year as a result of weak U.S. demand. “Honestly, it is difficult to foresee when it will bottom out.”
Toyota reported operating losses at both its U.S. and European operations in the quarter to end-September and its sales fell globally for the first time in seven years. It lowered its group sales forecast by 500,000 vehicles to 8.24m.
The Japanese company joined BMW and Detroit’s loss-making carmakers in taking a big hit on its vehicle-financing division because of bad debts and falling vehicle resale values, which have caused lease deals to sour. The division’s operating income fell Y41.3bn ($422m), excluding valuations on interest-rate swaps.
Toyota slashed its net profit forecast for the year by 56 per cent to Y550bn and cut its operating profit forecast by 63 per cent to Y600bn, some Y200bn-Y400bn below most analysts’ expectations. Operating profit in the first half was Y582bn, so the group will do little better than break even in the second half.
Toyota is setting up an “emergency profit improvement committee”, chaired by Katsuaki Watanabe, president, to reduce costs and review production plans, the company said.
Overall car and light truck sales in the U.S. fell in October to their lowest level since 1983.
The collapse has precipitated a crisis in Detroit, whose three main carmakers' chief executives were on Capitol Hill to plead for federal aid at a meeting with Nancy Pelosi, speaker of the House of Representatives.
Toyota is retooling its North American plants to focus on smaller cars and hybrids and will sell a glut.
(Source: Financial Times)