Will Toyota now make a full year loss?

Posted by: Ian Rowley on December 18, 2008

The awful news in autos is unrelenting. There’s an article in today’s Nikkei newspaper which raises the possibility that Toyota could makes it first ever operating loss (although Toyota once made a pretax loss in 1949).

While Toyota is projecting earnings of about $6 billion (down over 70% on last year), the paper contends that the recent surge in the yen and worsening sales could change all that. If so, that would mean Toyota will make a loss bigger than the $5.8 billion it made in the first half of its fiscal year, which runs April to March.

In the economic current climate it’s hard to say what will happen. On the negative side, Honda just revised its earnings projection down over 60% compared to six weeks ago. And Toyota suffers more from the yen swings. For every one yen strengthening of the yen against the dollar, Toyota’s operating earnings are reduced by over $450 million. Today, the yen is at 89 to the dollar, compared to an average 114 last year. That exchange rate wasn’t help by the Fed cutting its interest target to near zero this week. Toyota’s current profit projections are based on a rate of 100 dollar. The euro has also weakened against the dollar. Meanwhile, sales are plunging in Japan, Europe and the U.S.

Still, that doesn’t mean the loss is guaranteed. Toyota, like all car makers is also undergoing a big program of cost cuts, including delaying new factory openings and other capital investments. If the economic outlook improves, the yen could weaken a little. And the prospect of the Toyota, Japan’s biggest exporter, making a loss will also increase pressure the Japanese government to intervene in the currency markets to weaken the yen.

Reader Comments

Boomerang effect

December 19, 2008 7:59 PM

Japan used to hoard trade surplus and foreign exchange for decades. That dirty money caused lots of international financial market bubbles such as Latin America, South Asia, now Wall Street. This time Japan is going to pay for the sins she committed. Japan should learn too greedy trade practices will eventually hurt her own people. Toyota making loss won't surprise me! Sony's electronic business may vanish.

Poonam

December 19, 2008 8:24 PM

Toyota and Honda have a big fan following in India. But both have refused to launch affordable products in the market. They can easily overtake Suzuki. And make millions in the process.

Now it seems too late, given the E-downturn. Besides the Nano is looming round the corner. Don't know what the thinking is. They should invest big in India and China.

FBEye

December 20, 2008 2:24 PM

Almost all Publicly Held Companies have only one goal- to make MONEY! That goal always gets in the way of forward thinking, and will result in failure whenever an economy turns sour. The world economy has turned sour! Toyota will suffer. Almost every Publicly Held Company will suffer. The bigger they are the harder they fall!!! Toyota's sales & profits will FALL dramatically. Three cheers for Tata & their Nano!!! P.S. I just read some complaints about Toyota's sludge problem in their engines. You can type in- "Engine Sludge", and read all about it. Happy Holidays from the FBEye!

Angry right

December 21, 2008 11:27 AM

Big 3 would love to have Toyota's problem.

Alex

December 21, 2008 10:22 PM

Once mighty sony fail today.
Now undisputed industry leader Toyota will fail tomorrow.

Thompson Chima

December 22, 2008 5:08 AM

Hello

Toyota may fail today but its investments in terms of asset around the global would still resuscitate its self. Toyota is massive!!!!

Sherri

December 22, 2008 1:24 PM

I'm pretty sure it is the UAW's fault!

David

December 29, 2008 10:43 AM

Well, driving cars is so old school, tired, and so out of step with the modern world that is it even possible for anybody to care if these car companies suffer? The best thing that could happen is that we get serious about building first class public transit systems and scrap this harmful idea of every person moving 2 tons of metal to get anywhere. Cars cause the obesity crisis. How does the addition of each new car benefit the health of your family or your neighborhood? Show me a soft, weak, pudgy person and I will show you a car driver.

Charlene Blake

July 8, 2009 3:01 PM

Toyota customers have been experiencing record financial losses of their own!

See the following links for more information:

http://www.toyotaoilgel.com
http://www.uc2.blogspot.com
http://www.petitiononline.com/TMC2003/petition.html

Follow "toyotasludge"on Twitter.

Charlene Blake

January 27, 2010 8:50 PM

Toyota has said for a DECADE that Toyota ENGINE OIL SLUDGE (or GEL as it calls it) is caused by owner neglect. This company REFUSES to believe that there is an inherent problem in the engine!

Read the online petition that has over 3,000 signatories to see what is happening. This company is NOT honoring it own program which it touted as "unprecedented and generous."

Are we to believe that Toyota has suddenly gained a conscience after a DECADE of lying to Toyota owners?

Don't fall for it...Toyota is once again attempting to manipulate public opinion about it, IMO. I am far from alone in this belief.

Toyota engine oil sludge is alive and well in the later model Toyotas, too. This problem along with the ABS/brake failures (in light rain and snow, particularly), wearing tires, sticking sliding doors, emissions-control problems, failed transmissions, engine fires, and more paints a very different picture of Toyota than the one in all the Toyota ads.

See the new Toyota ad...the one that claims that Toyota is with the customer in good times and bad? Well, after a decade following the engine sludge or gel problem, I can advise that you shouldn't hold your breath in getting relief for your major issue.

Charlene Blake
charleneblake@cox.net

Toyota Owners Unite for Resolution: Engine Oil Sludge

YouTube video on Toyota Sludge

Toyota Oil Gel dot com

UC2blogspot dot com

mylexusisdefective dot com

Need more information? E-mail toyotaoilgel@cox.net

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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