Toyota Slashes Annual Profit Forecast

TOKYO — Toyota Motor slashed its annual profit forecast by more than half on Thursday, warning of a long and severe downturn in global auto markets.

Japan’s largest automaker also reported that net profit in the three months ending Sept. 30 dropped by more than two-thirds, hurt by falling demand, a tightening of car loans amid the global credit crunch and a stronger Japanese currency.

The cut in the annual profit forecast, which was larger than expected by most analysts, would end eight straight years of annual profit growth at Toyota, underscoring how the current crisis is hurting Japan’s once mighty automakers. Of Japan’s eight automakers, only one, Fuji Heavy, maker of Subaru, has not lowered its annual profit forecasts in recent weeks.

“The severity of the current situation is like nothing we have seen before,” Mitsuo Kinoshita, a Toyota executive vice president, said. “The global financial crisis has affected the real economy, and the auto markets, particularly in developed countries, are contracting rapidly.”

“It is difficult to predict when it will end,” he added.

While Toyota released earnings after the close of stock trading, fears of sharply lower earnings drove its share price down 10.4 percent on Thursday.

The lowered profit forecast was latest sign that recession that began in the United States was spreading around the globe, threatening even fast-growing markets like India and China, once seen as immune to an American downturn.

While Toyota recorded growth in Asia and other developing areas, it was not enough to overcome steep declines in the developed markets of North America, Japan and Europe.

“This is another sign of the collapse of the decoupling theory,” said Yasuaki Iwamoto, an auto analyst at Okasan Securities in Tokyo. “The whole world is down because of the North America troubles. That hurts even a company with a more global revenue base, like Toyota.”

Toyota said it now expects net profits of 550 billion yen, or $5.5 billion, for the current fiscal year ending March 31, 2009, down 56 percent from its earlier forecast of 1.25 trillion yen. That would be the company’s lowest profit in nine years, and about a third of the 1.72 trillion yen net that it earned last year.

Toyota also cut its annual sales forecast by 2 trillion yen to 23 trillion yen. That would be down from sales of 26.3 trillion yen last year. Toyota said net profit in the July-September quarter fell 69 percent to 139.8 billion yen.

The grim earnings report came just days after Toyota announced that October sales in the critical United States market had fallen 23 percent from last year. The slowdown has hit American rivals even harder, with General Motors reporting a 45 percent decline in the same month.

On Thursday, Toyota reported an operating loss of 34.6 billion yen in North America in the six months through September, when its sales there dropped 20 percent. That was more than enough to offset gains in Asia, where operating profit rose 17 percent to 137.2 billion yen, the company said.

The company was also hurt by rising costs of steel and other raw materials, as well as a stronger yen, which erodes value in Japan of overseas earnings and makes Japanese products more expensive abroad. Toyota also cited intensifying global competition in lower-cost vehicles.

On Thursday, the chief executive of rival Honda Motor, Takeo Fukui, called on authorities in Japan to intervene to drive down the yen, which has risen to about 98 yen to the dollar from about 120 a year ago.

Such pleas for government help have also been echoed by Detroit’s Big Three, who are lobbying Congress for more aid atop a $25 billion in loans already promised.

The global slowdown has struck Toyota just as it finishes rolling out a full lineup of vehicles, including larger eight-cylinder models like its Tundra pickup truck, in a bid to overtake G.M. as the world’s largest automaker. Thursday’s results suggested the slowdown was hurting sales of Toyota’s entire lineup, including popular, fuel-efficient models like its hybrid Prius and Camry sedan.

Analysts expect Toyota to react to the slowdown by cutting costs and shifting more production and parts sourcing to local markets. The global slowdown has already forced the carmaker to put new factories on hold, layoff workers and offer ever sweeter incentives to entice buyers back into showrooms.

On Thursday, Mr. Kinoshita said the company had formed a special committee headed by its president, Katsuaki Watanabe, to find ways to address the current harsh environment, such as cost cutting and developing competitive new vehicles like its super-compact car iQ, which it unveiled recently.

Worldwide, the Toyota City-based company said it expects to sell 8.24 million vehicles in the current fiscal year, down 7.6 percent from a year before.