Toyota Motor Corp. (NYSE: TM) reported a surprise profit Thursday and cut its projected red ink for the year by half, according to Associated Press.
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Although far from a full-fledged turnaround, Toyota's results showed the healing effects of government stimulus measures to spur sales of environmentally friendly cars and other vehicles, as well as soaring demand in emerging markets like China. Rivals Honda Motor Co. (NYSE: HMC) and Nissan Motor Co. have also issued healthier reports and outlooks recently.
For the July-September quarter Toyota, the world's largest car company, posted better-than-expected net income of 21.8 billion yen ($242 million) after three straight losing quarters, defying some expectations of another loss.
That marked an 84 percent tumble from the 139.8 billion yen the company earned in the same quarter a year ago, but was still one of the clearest signs yet Toyota was rebounding from its biggest loss ever during the last fiscal year.
Especially positive were gains in China, where Toyota vehicle sales last quarter surged to a record at more than 204,000 vehicles, up 39 percent from the same period the previous year. China's auto market is on track to become the world's biggest, replacing the U.S., this year.
With sales proving better than expected the last six months, Toyota upped its sales forecasts for the fiscal year through March 2010, from 7.03 million vehicles from 6.6 million. It also expected a smaller loss for the fiscal year of 200 billion yen ($2.2 billion) -- less than half the 450 billion yen ($5 billion) loss it predicted earlier.
The revised vehicle forecast was still a 7 percent drop from the more than 7.5 million vehicles Toyota, which makes the Prius hybrid and the Corolla subcompact, sold around the world in the last fiscal year. Still, sales were growing in Asia compared to a year ago.
Executive Vice President Yoichiro Ichimaru said Toyota made good progress on "emergency" efforts to combat its crisis by cutting costs, while acknowledging that global uncertainties remained.
If Toyota can manage the latest forecast, it would be a major improvement over the 437 billion yen loss it posted during its last fiscal year, the worst performance in the company's 72-year history.
For the latest quarter, the company recorded 4.542 trillion yen ($50 billion) in sales, down 24 percent from the same period a year earlier. Despite the result, Toyota is still struggling.
In a tearful news conference Wednesday, Toyota pulled out of expensive but glamorous Formula One racing, acknowledging it has to focus on its core car business.
In the U.S., it faces an investigation by federal authorities into problem floor mats, suspected of jamming the gas pedal and possibly causing crashes. A recall would affect 3.8 million vehicles, including the top-selling Camry sedan. The probe is already endangering Toyota's pristine reputation for quality.
Toyota has said it is fully cooperating in the investigation and has issued a warning not to use the problem mats. But U.S. authorities said earlier this week that was an "interim measure" and have urged Toyota to come up with a solution for "the underlying defect in the vehicles."
Like other Japanese exporters, Toyota has been hurt by a strong yen. The dollar has traded at 90 yen levels in recent months, down from about 108 yen a year ago. Toyota said unfavorable exchange rates erased 180 billion yen (about $2 billion) from its latest quarterly profit.
Ryoichi Saito, auto analyst with Mizuho Investors Securities in Tokyo, said Toyota's recovery appeared to be slower than Honda's because of costs related to withdrawing from F1 and closing a California plant it ran with General Motors Co., called NUMMI, short for New United Motor Manufacturing Inc.
On the bright side, demand is surging in Japan for its Prius hybrid, which is now tax free thanks to a government stimulus measure, in addition to stronger sales in China.
Signs are also emerging the decline in U.S. demand may finally be bottoming out, although sales remain weak. Toyota's vehicle sales in October edged up less than a percent in the U.S.
For the first fiscal half, Toyota lost 56 billion yen ($622 million), a reversal from 494 billion yen in profit, on 8.378 trillion yen ($93 billion) in sales, down 31 percent from the same period the previous year.
Honda, Japan's No. 2 automaker, last month raised its profit outlook for the full fiscal year to 155 billion yen ($1.7 billion), nearly four times its initial projection.
Earlier this week, Nissan, the nation's third-largest automaker, said it expects a narrower net loss of 40 billion yen ($444 million) for the fiscal year through March 2010, better than its earlier forecast for a 170 billion yen ($1.8 billion) loss.
Shares of Toyota, which reported after the close of trade Thursday, closed down 0.8 percent at 3,580 yen ($39) in Tokyo.
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