Toyota Posts $2.2 Billion Annual Profit

Toyota Posts $2.2 Billion Annual Profit
By HIROKO TABUCHI
Copyright by The New York Times
Published: May 11, 2010
http://www.nytimes.com/2010/05/12/business/global/12toyota.html?hp


TOKYO — Toyota roared back to a profit in the fiscal year that just ended and forecast a further jump in earnings on Tuesday, shaking off the effects of a crippling global slowdown and a safety scandal that has threatened to ruin the Japanese automaker’s cherished reputation for quality.

Toyota thwarted a third consecutive year in the red thanks partly to a strong performance in the three months through March — the period when the Japanese automaker recalled millions of cars and was under the intense scrutiny of consumers and governments around the world .

Net profit for the three months was ¥112 billion, or $1.2 billion, compared with a ¥766 billion loss the year before, as the automaker slashed costs and introduced aggressive sales incentives that lured customers back to its showrooms.

“After taking over amid a storm, I wanted to do anything to avoid a third straight year in the red,” Toyota’s president Akio Toyoda, who took helm at the company in June 2009, said after the earnings announcement. “These results follow tough and anguishing decisions” on the part of Toyota’s management, he said, referring to the automaker’s dismissal of workers both in Japan and overseas amid company-wide cost cuts.

Quarterly revenue jumped to ¥5.28 trillion from ¥3.54 trillion the previous year, when car sales slumped in the midst of the global financial crisis. Revenues showed an especially strong rebound in the dynamic Chinese market and in the United States, while sales in Europe and Japan continued to slump.

Toyota estimated net income to rise to ¥310 billion in the business year through the end of March 2011, a conservative estimate. It expects to sell 7.29 million units, or 53,000 more than it sold this year, the automaker said. Toyota also announced a cash dividend for the full fiscal year of ¥45 per share.

For the past business year that just ended, net income rebounded to ¥209.4 billion, or $2.2 billion, from a loss of ¥437 billion the previous year.

Still, the automaker, led by the founding family scion Akio Toyoda, faces tough challenges ahead. It has come under renewed scrutiny in the United States, where regulators opened yet another inquiry Monday into the company’s handling of potentially dangerous defects found in its cars, this time over a steering-relay rod defect in Hilux trucks.

Toyota faces multiple shareholder lawsuits, as well as consumer lawsuits claiming injuries or deaths caused by sudden acceleration incidents in Toyota vehicles.

“We’re still in a storm — there’s been no change on that front,” Mr. Toyoda said. “But from the storm, we’ve begun to see glimpses of sunny but faraway skies,” he said. “I feel that we’re starting to approach safer waters.”

Toyota, which is based in Toyota City, has recalled more than nine million vehicles worldwide for faulty accelerator pedals and other problems that have tarnished the company’s reputation for making safe and reliable cars.

In April, Toyota agreed to pay a $16.4 million fine, the largest allowed by U.S. law, imposed by the Transportation Department, which charged that the company hid information about one of the pedal-related recalls.

It was the largest such penalties ever handed out to an automaker in the United States. Toyota has not admitted fault. But it faces the possibility of at least two more such fines, although it could be several months before action is taken, the U.S. transportation secretary, Ray LaHood, said on Monday in Japan after a visit to Toyota’s headquarters in Toyota City.

Last month, Moody’s Investor Services cut Toyota’s credit rating, warning that the effects of recent recalls and a still-sluggish economy would weigh on the automaker’s bottom line for some time.

But Takahiko Ijichi, senior managing director at Toyota, suggested those fears were overblown. Toyota’s sales have been making a rebound: In March, global sales jumped 26 percent from the previous year, due in part to generous incentives offered in the United States, while global production surged 80 percent.

“The effects of the recall have been smaller than we’d expected,“ said Mr. Ijichi. The company has said it spent ¥100 billion on recall-related measures, and lost between ¥70 billion and ¥80 billion yen in sales during the year ended March 31.

Recall woes could continue for some time, however. The National Highway Traffic Safety Administration said Monday it was investigating whether Toyota waited too long to inform the U.S. agency of steering-relay rod defects in Hilux trucks after a 2004 recall in Japan for that same flaw. Automakers have five business days to report safety flaws to regulators under U.S. law.

At that time, Toyota told U.S. regulators that the defect was only in vehicles sold in Japan and the company had not received similar information in the United States, the agency said. In 2005, Toyota told the agency that the defect was indeed in models sold in the United States and conducted a recall.

The Department of Transportation is also looking through 500,000 pages of documents to determine whether to levy additional fines against the Japanese carmaker, a process that could take months.

Mr. LaHood, the transportation secretary, said Monday that he sensed a change of attitude at Toyota since February, when Mr. Toyoda solemnly faced questions before a Congressional panel and spoke with Toyota dealers, choking back tears.

The automaker, which faced “very, very serious credibility problems” in the wake of its crisis, has changed gears, while Mr. Toyoda has “listened and paid attention,” Mr. LaHood said.

Toyota did not give an estimate for a spillover of any recall costs into the current business year. Toyota did say, however, that it will spend about ¥80 billion in incentives to boost sales.

Makiko Inoue contributed reporting from Tokyo.