Toyota Predicts First Loss in 70 Years

The global recession has finally caught up with Toyota Motor Corporation, which announced on Monday that it is anticipating a loss of US $1.7 billion for the fiscal year ending in March 2009. It would be the first time in 70 years that Toyota’s annual operating budget ended up in the red.

The figure is especially shocking since Toyota projected a $14 billion profit earlier in the year, and re-adjusted that forecast downward to $6.7 billion as recently as November. It also comes on the heels of eight consecutive year-over-year profit records, ending with more than a $25 billion surplus for fiscal 2008.

Toyota and the other Japanese automakers have maintained an edge over American manufacturers due to a more progressive, long-term business philosophy. Rather than targeting quarterly earnings and profits, Toyota has based its success on planning years, and even decades ahead. Progressive thinking has allowed the automaker to become the world leader in hybrid cars.

But as vehicle sales plunge, even Toyota is not immune to the fallout of the financial crisis. “The environment surrounding us is extremely severe, and we are facing an unprecedented, emergency situation where we have no choice but see an operating loss this year,” said Toyota President Katsuaki Watanabe. Toyota expects to sell 12 percent fewer cars than it had originally predicted. That number is expected to directly translate to a slide in hybrid vehicle sales, which have also suffered due to declining gas prices. Nevertheless, Toyota is standing by its goal of selling 1 million hybrids per year soon after the turn of a new decade.

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  • Bryce

    It’s lack of union workers really helps it keep down costs. Must be nice. That’s why they put their factories in the south. (anti-union territory) They are not alone of course though. The other japanese and even some german manufacturers are there as well. They are also fortunate to have a new and young worker base without health care costs and retirement what not. In this environment, sadly for the UAW, a union becomes absolete if all auto workers can’t be unified, then the union is useless because some companies will be able to maintain those low wages making the other companies, and in our case, government want their wages to come in line with competition. The UAW failing to organize the southern auto workers when those factories started signaled their own death. Through their waning influence however, costs will luckily go down at domestic automakers and they will grow more profitable. Couple that with some brand trimming, utilization of global resources, and a continued focus on good product, and the domestics should be on their way to profitability in no time.

  • JJspawn

    The difference in actual pay is minimal at worst, but the difference in pension and retirees is what is killing US automakers. It is a microcosm of what will/is happen with social security and Baby Boomers retiring. If you have 1 person is working to pay for 4 other peoples benefits then there will be a problem.

    Toyota loses for one year big freaking whoop.

  • Dan L

    If I decide not to buy a car, does it matter what kind of car I don’t buy? You can talk all you want about unions and pensions. In normal times those arguments would matter. But right now NO ONE IS BUYING CARS. US automakers could get their union and pension problems completely squared away and it wouldn’t matter. They still wouldn’t be able to sell cars right now. And if they don’t start selling cars soon they will go bankrupt.

  • Bryce

    Well, the idea is that they square away their problems now so they don’t hamper efforts down the road when the market is more friendly to all the automakers. This is definetly a bad market, probably the worst since the great depression, if not the worst ever. (for cars anyways)

  • John McMillen

    This just proves that it is not unions that the right wing wackos keep trying to brainwash people with that is killing the big 3. Its the economy!!!

  • Anonymous

    We own a Pont GMC Cadillac dealership and while times are slower..people are buying cars. In spite of the econ people are buying Yukons and Escalades at a rate not seen in years.

  • RKRB

    It’s not just greedy unions, CEO salaries, sub-prime banking, befuddling government regulations, the economy. Those are part of the pie chart but ….

    The price of cars, like the price of real estate, has escalated beyond reason or support. I priced a decent economy car the other day, with a few options like a sunroof and stability control, and found I wouldn’t get much change from a $23,000 bill. Add the state sales tax, an extended warranty, insurance increases, a rapacious new-car registration fee from our esteemed local government, and you soon kiss goodbye to 30 thousand George Washington’s, and you’ve lost about half of those when you drive the car off the lot. If you throw in a hybrid drive system,and include the markups added by many hybrid dealers, your total is what the average person makes for aboutr eight months of hard work. Examine a BMW diesel, and the sellers begin to resemble robber barons (you can talk about perceived quality and advertised engineering all you want but greed is greed). If you are retired, fuggeddaboudit.

    Yes, inflation has happened, but so has sticker shock. A loaf of bread is more expensive than a few years ago but that expense is more manageable. A new stereo is cheaper now than two weeks ago, and so are most stocks. Gourmet coffee you can get at home. If you move and must buy a house, you have no choice. But if you want a new car? There are other options.

    Among those options … our dependable well-maintained 4 cylinder Ranger may stay a bit longer. At 28 mpg versus 35 for a compact and 40 for a hybrid, it would be decades to the breakeven point (and I also drive less now, and slower, which pollutes less too). Nooo thanks. When I want to give money away it will go to our local homeless clinic, university, church, humane society, and conservation group, not to the car makers. The real estate and stock market bubbles should send a message about inflated costs. And desires.

  • meredith

    Someone didn’t read the article carefully. It ain’t about wages or workers. It’s about planning for the future.

    Something, I might add, that unions do not do.

    By the way….how much do the CEOs of UAW make? Are they taking a pay cut so the union dues could be lowered?
    I am all for fair wages and benefits but do you squeeze blood from a dying man….GM is going to be dead by 2010, there is no hope there! So let’s squeeze the last dollar bill out while we can, never mind that millions will be out of work later. That’s a union that’s looking out for the worker…..? Give me a break!

  • Bryce

    Wagoner actually works for only 2 million (prior the new 1 dollar thing) which is far below what would be expected for a company that rakes in about 200 billion a year. That makes Wagoner’s pay 1/100,000 (one hundred-thouasandth) of the company revenue. compare that with the costs of maintinaing health care and wages for retires and curent workers which ammounts to several dozen billion, I am not so sure executive compensation ties a big part into the problem.

  • bill cosworth

    Well if toyota actually made cars that people wanted to buy maybe they would not be in this mess.

    I predict toyota will be down about 4-5 billion because they work the books to make them look better.

    The damage is much worse then they are releasing. Toyota is evil PR machine.

    They plan to take over the USA failed now. So they have to re-group and see what to do next.

  • cindy math

    Toyota cars are junk thats why they are not selling.

    They build cheap tinfoil cars.

    Why make Japan rich . When we build much better cars in the USA.

    Oh and this article is wrong. American is 100% more foward thinking.

    The Hybrid and the electric car were both invented in the USA.

    In fact 98% of all products made in japan and china were invented in the USA including the VCR.

    So the author is totally wrong.

  • Bryce

    Those are certainly not kind words for our allies and friends the Japanese……though I do enjoy a good bashing on Toyota, (boring cars, but not necesarily bad quality…..maybe bland and shoddy interiors…..but the mechanics of the vehicles are solid) decrying the whole Japanese auto industry seems a little unjust and not in the best interest of competition. I welcome all foreign competitors. (though the Japanese do not sadly, blocking their market, making it so it is controlled 96% by their own domestics.)

  • Shines

    Bill, Cindy,
    Sorry but your arguements are pathetic. Toyota is expecting its 1st loss in 70 years. It is not on the verge of bankrupcy like GM. Saying Toyota makes cheap tinfoil cars does not make it so. There is nothing in the article about what was invented by anybody.
    So cindy math you are totally wrong.
    The article talks about planning ahead so that the company can come out of this industrial wide slump better than the competition. That is one reason Ford does not need government loans. Ford has planned better than GM and Chrysler. I just read an article in today’s Seattle Times about the 2010 Fusion hybrid, the writer got over 50 mpg – thats a mid-sized car with more room and a larger trunk than the Camry hybrid. And with the Japanese yen at a multi-year high against the dollar – that means the American made Fusion should cost less, provide higher quality and get better fuel economy.
    PS – I agree with Bryce on the Japanese Govt being protectionist and blocking their market to foreign cars. That’s a cowardly act on their part. Its a good thing their market is small compared to the US market.

  • Bryce

    well, it isn’t exactly a small market, it could be lucrative, but their government won’t let anyone in. It actually jurts the Japanese consumer sadly because their govt follows similar policies on things like food making thier food costs some of the highest in the world. Their goes all the purchasing power of the citizens of the second wealthiest nation on Earth. sucks for them.

  • veek

    After unsuccessfully trying to sell US-designed cars in Japan during the ’80’s, US-based manufacturers responded by directly investing capital and management in companies like Mazda, Suzuki, and Isuzu. This benefits US-based manufacturers by giving them access to greater profits, and also by allowing Ford and GM access to Japanese small-car engineering and design.

    For example, Mazda-engineered cars may help save Ford.

    This seems like a win-win situation.

  • suzanne scholl

    Well its not a surprise with all the problems they had in resent months..should be interesting to see final numbers.