Toyota Slashes Forecast for Its Global Auto Sales ‘Cautious Targets’ for an Ailing Economy

By David Jolly

Even Toyota is not immune to the slowdown in the global economy.

The Japanese company, which is battling General Motors for the title of the world’s largest automaker, cut its sales forecasts Thursday, warning that higher fuel costs and the economic downturn in the United States and Europe were likely to hold back the auto business at least through 2009.

“We have been going at top speed up to now,” Katsuaki Watanabe, the Toyota president, was quoted by The Associated Press as telling reporters in Tokyo. “It is time to set more cautious targets.”

The Japanese group, which includes Daihatsu Motor and Hino cars, now expects to sell 9.7 million cars and trucks in 2009, Watanabe said, 700,000 fewer than its previous forecast. That is still 2.1 percent higher than the 9.5 million Toyota expects to sell this year.

A big reason for Toyota’s more bearish outlook is the 10 percent reduction, to 2.7 million vehicles, in the company’s 2009 sales target for the United States, where Toyota has invested heavily in trucks and sport utility vehicles that have lately fallen out of favor. Toyota said it would also be cutting production in Britain and Poland to bring output in line with slipping demand in Europe.

Toyota is only the latest of the global automakers to admit to suffering as inflation and economic weakness in their major markets undermine consumers’ buying power, and high gasoline prices drive a shift toward more fuel-efficient, and in many cases, less profitable, vehicles. Still, Toyota posted profit of about $3.2 billion for the three months through June 30, and its market value of about $150 billion dwarfs its rivals.

Auto sales are slumping in the world’s two most important markets, North America and Western Europe. U.S. auto sales fell 10.6 percent from a year earlier in the January-July period, according to Ward’s Automotive Group, as the rate of decline accelerated in the second quarter. Western European sales fell 2 percent in the first six months of the year, according to the European Automobile Manufacturers’ Association.

The auto industry’s pain has been particularly intense in the United States, where Ford posted an $8.7 billion second-quarter loss, and General Motors posted a $15.5 billion loss for the quarter. The Detroit automakers have idled truck plants across North America and laid off tens of thousands of workers. The U.S. automakers are trying to drum up political support for a government aid package.

Volkswagen, the largest European automaker had second-quarter net profit of about $2.5 billion, while its German rival Daimler posted $2.2 billion. But European companies are also under pressure. The French automaker Renault warned in July that “the deterioration in the macroeconomic environment has far exceeded the worst-case scenarios envisaged,” while Daimler said it was assuming that the world economy “would continue to lose momentum as the year progresses.” High prices for raw material, rising inflation and the credit crisis, Daimler added, would almost certainly prevent a significant near-term revival.

Toyota’s outlook has been hampered by the 20 percent of its U.S. lineup that is made up of big sport utility vehicles and pickup trucks. The company said last month that it had misjudged the speed of the swing in consumer taste toward smaller cars. The announcement Thursday was an acknowledgement of what many analysts had expected.

“It’s not surprising, given the market conditions, but I think their forecast might be a little conservative,” Tatsuo Yoshida, an auto sector analyst at UBS in Tokyo, said. He predicted 2009 sales would come in closer to 10 million vehicles.

“Sales are still growing,” he said, “but the pace is a lot slower.” And the company disappointed analysts Thursday by declining to provide a forecast for 2010, he said, suggesting that the business outlook remains extraordinarily cloudy.

Toyota and Nissan Motor are more exposed to the current problem than Honda Motor, whose trucks and sport utility vehicles are generally smaller and lighter than its competitors. With its nimbler fleet, Honda has benefited directly from the shift to more fuel- efficient vehicles.

Toyota is working quickly to get back its momentum. It is reconfiguring its U.S. operations, concentrating truck production in Texas, and retooling a Mississippi factory that had been meant for its Highlander crossover vehicle to make its Prius hybrid cars. On Monday, Toyota said it would raise prices on some vehicles in Japan to protect profits, the first time in decades that it has increased prices there on existing models.

The problem of the wrong product mix is weighing even more heavily on U.S. automakers. In July, General Motors dealers reported an average 174-day on-hand supply of the Yukon XL-Suburban, up from a 92-day supply a year earlier. Inventory of Chevrolet’s C/K Suburban nearly doubled over the period, to 116 days from 63 days. The U.S. automakers are offering discounts of $10,000 or more on some sport utility vehicles just to get rid of them so that dealers have space to stock more of the fuel-efficient cars consumers are clamoring for.

Watanabe, the Toyota president, also said that Toyota would roll out its plug-in hybrid car in 2009, a year ahead of schedule, though it will be available initially only to corporate fleets. Toyota may be feeling added urgency to get the car on the road, because General Motors said this month that it had “essentially finished” designing its first plug-in hybrid car, the Chevrolet Volt, and said a production-ready prototype would be ready soon. Nissan Motor is planning a purely electric vehicle of its own, which it plans to begin selling by 2010.

And Toyota, which sold 4.8 million vehicles worldwide in the first half to GM’s 4.5 million, is investing aggressively in its business, Yoshida said, and will be better positioned once the current problems ease. “When the business environment is tough, the stronger players become even stronger,” he said.

Originally published by The New York Times Media Group.

(c) 2008 International Herald Tribune. Provided by ProQuest LLC. All rights Reserved.