Toyota Forecasts First Loss In 71 Years While Honda Considers Moving Out Of Japan

The global economic crisis is fairly ripping its way through the balance sheets of the world’s car manufacturers, with Toyota being the latest to officially recognise the carnage. The world’s largest car manufacturer has forecast its first annual loss in 71 years.

Toyota has confirmed that it expects to post a loss of 150 billion yen (AUD 2.43 billion) for the year to end-March for its core operations. This compares to a record 2.27 trillion yen profit in the previous year – a massive turnaround.

Toyota is now expecting to post a group net profit of ‘just’ 50 billion yen (AUD 814 million).

Toyota cut its group operating forecast to a loss of 150 billion yen ($1.7 billion) for the year to end-March, after shocking financial markets last month by slashing its group operating profit forecast by 1 trillion yen to 600 billion yen.

It made a record profit of 2.27 trillion yen last year.

“The company [Toyota] is facing an unprecedented crisis where it cannot avoid posting an operating deficit in this term. We will have to build on the company’s strengths to ensure profit,” said Toyota president Katsuaki Watanabe

Toyota will be taking time out to ‘lick its wounds’, with Mr Watanabe stating that Toyota will “review almost all projects aimed at expanding production ability or building new plants” .

Toyota, like all manufacturers, is suffering as world car sales plummet, combined with the added issue being faced by Japanese manufacturers - a soaring yen eating into their manufacturing costs and profit margins. In an unusual move, Toyota has refrained from providing its usual projections for upcoming years.

On the subject of the rising yen, Honda’s CEO, Takeo Fukui, has made it clear that he is not pleased with the Japanese government’s ‘hands off’ approach with the runaway currency. Fukai has suggested that he will not sit back and watch Honda suffer, in fact he will give consideration to moving Honda’s corporate headquarters to another country. And that’s just the start. Factory closures, permanent layoffs and moving production out of Japan are on the cards as well.

“If the exchange rate becomes increasingly unfavorable, we would simply have to transfer more production overseas, cut more temporary workers and even start laying off permanent jobs. Beyond that we could switch to importing more cars into Japan, bring research and development facilities overseas, and in an extreme scenario move our headquarters offshore. It would cause nothing short of a hollowing out of Japanese industry,” said Fukai

If the yen doesn’t begin to track back of its own accord, Fukai is calling for the Japanese government to step in and devalue the currency.

Like Toyota (and so many others), Honda has announced that it would be slashing its earnings forecast for the second half of fiscal 2008, ending March 2009, reducing its operating profits by 67 percent to 180 billion yen (AUD 2.9 billion). One of the cost-cutting measures announced late last week was the cancellation of the almost finished NSX sports car.

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[Source: Reuters]