Toyota returns to profit as stimulus boosts sales

TOKYO – Toyota Motor Corp. said Thursday it returned to a profit in the latest quarter and trimmed its projected red ink for the year, underlining the gradual recovery under way for Japan's giant automakers.

The world's largest car company reported a better-than-expected 21.8 billion yen ($242 million) profit for the July-September period after three straight quarterly losses, citing stronger sales boosted by government incentives.

The result marked an 84 percent plunge from the 139.8 billion profit racked up during the same period a year ago, but offered evidence Toyota was starting to heal after posting its worst loss ever in the last fiscal year.

Other Japanese automakers have made similar strides recently, with Toyota rivals Honda Motor Co. and Nissan Motor Co. both reporting healthier earnings after taking a battering from the global economic crisis.

Toyota said it now expects to sell more vehicles for the fiscal year through March 2010, raising its projections to 7.03 million vehicles from 6.6 million.

The revised forecast still marks a 7 percent drop from the more than 7.5 million vehicles Toyota had sold around the world in the fiscal year ended March 31, though sales were growing in Japan and the rest of Asia compared to a year ago.

The company, which makes the Prius hybrid and the Corolla subcompact, said sales in the last six months were proving better than earlier expectations as government efforts to attract more buyers spur global demand.

Toyota forecast a smaller loss for the fiscal year of 200 billion yen ($2.2 billion) _ less than half the 450 billion yen ($5 billion) of red ink it had predicted earlier.

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 the National Highway Traffic Safety Administration said earlier this week that was an "interim measure," and has 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.

On the bright side, Toyota is benefiting from strong sales in China and other emerging markets, although that has yet to completely offset flagging sales in the key North American market. And demand is surging in Japan for its Prius hybrid, which is now tax free thanks to a government stimulus measure.

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.

"We continued to make improvements in our reductions in fixed costs," he said. "In addition, demand-stimulating measures by governments worldwide have contributed to our revised targets."

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.