Toyota nine-month profits quadruple, yen weighs

Auto giant profits quadruple and up its outlook despite a damaging crisis involving millions of recalls and lawsuits.

TOKYO: Japan's Toyota said Tuesday net profit for the nine months to December nearly quadrupled and upped its outlook despite a damaging crisis involving millions of recalls, lawsuits and record fines.

However, the maker of the popular Prius hybrid saw a 39 per cent fall in third quarter net profit on-year as sales slipped and operating profit tumbled at a time when the yen hit 15-year highs versus the dollar.

Previously lauded for its safety, Toyota became mired in crisis when it recalled nearly nine million autos between late 2009 and February last year on brake and accelerator defects alleged to have caused dozens of deaths.

The crisis dealt a huge blow to the firm's reputation and predictions it would lose market share as it tightened its recall policy to encompass around 16 million vehicles between late 2009 and January this year.

But despite a third quarter profit plunge, Toyota joined rival Honda in foreseeing a brighter annual picture on expectations of strong demand in emerging markets. Net profit for the nine months to December soared 293.7 per cent to 382.7 billion yen and the car giant raised its annual net profit forecast to 490 billion yen ($5.95 billion) from an earlier 350 billion yen.

"I think half of the wounds (from the recalls) have been healed," senior managing director Takahiko Ijichi told reporters, adding that cost cuts and efforts to improve profitability were bearing fruit. "We are achieving large profit gains and are on a steady recovery path by more than offsetting the negative effects of the rapid rise of the yen," he said.

However, the 39 per cent fall in third quarter net profit year-on-year reflected the impact of a strong yen on sales and operating profit. In the three months ended December, sales fell nearly 12 per cent to 4.6 trillion yen while operating profit tumbled 48 per cent to 99 billion as operations exporting vehicles from Japan exposed it to the yen's rise.

Japan's automakers have returned to profitability since the financial crisis but a pickup in demand has been overshadowed by the impact of the strong yen, making their products more expensive overseas and eroding profits.

The expiration of Japanese government subsidies to encourage consumers to buy more environmentally friendly cars in September last year has also weighed on the nation's automakers, hitting domestic demand in the second half.

But the latest figures come as Toyota's position as the world's biggest carmaker is under increasing threat from a resurgent General Motors after a huge wave of recalls tarnished its reputation.

In 2008 Toyota ended General Motors' 77-year reign as the world's largest automaker but the road has been a bumpy one for the Japanese giant, facing the impact of the economic crisis, recalls and recently a strong yen.

Analysts say the automaker is under pressure to regain consumer trust overseas, particularly in the United States - its second largest market by volume - where it has lost market share to rivals even as overall sales recovered. But Toyota's Ijichi said the automaker was recovering.

"As we see our sales share is not falling much but is staying at 14-15 per cent, I think half of the wounds have been healed," Ijichi said.

The automaker last month said it will recall 1.7 million vehicles worldwide over concerns about possible fuel leakages, in the latest setback for the troubled auto giant.

The US government plans to release the findings Tuesday of its investigation into reports of sudden acceleration in Toyotas, completing a 10-month review into the issues that prompted the millions of recalls.

In January Toyota announced global sales of 8.42 million vehicles in 2010, just ahead of General Motors' 8.39 million, confirming its position as the world's biggest carmaker for the third year running but with GM closing in.