Toyota to pump up production as profits surge

Carmaker rebounds from disaster

The New York TimesAugust 4, 2012 

Ron Thompson worked on the four-cylinder engine line at the powertrain plant at Toyota's Georgetown factory earlier year.

PHOTO COURTESY TOYOTA MOTOR MANUFACTURING KENTUCKY — Photo courtesy Toyota Motor Manufacturing Kentucky

TOKYO — Toyota roared back to a hefty profit in the first quarter and said Friday that it aimed to build a record-setting 10 million vehicles this year, leading a recovery by Japanese automakers after a year of natural disasters and a punishingly strong currency.

Though the strong yen continues to weigh on Japanese exporters' bottom lines, many other things are going right for Japanese automakers. Supply chains that were severed are up and running, and manufacturers such as Toyota and Honda are racing to meet pent-up demand and are fast regaining lost ground in profitable markets like the United States. Japanese government incentives on fuel-efficient cars have revived markets at home.

Whether Japanese automakers can keep up the momentum after these tailwinds dissipate is another question, analysts said.

"They're at the peak of their momentum, but for quite transient reasons," said Takaki Nakanishi, an auto analyst at Bank of America Merrill Lynch in Tokyo. "It's not party time. Japanese automakers still face tough conditions and competition, and a slowdown is likely in the second half."

Toyota said net profit for the April-to-June quarter had risen to 290.3 billion yen ($3.7 billion) from 1.1 billion yen a year earlier, after the number of vehicles it sold nearly doubled.

The brisk sales growth prompted the carmaker to raise its global sales target by 180,000 cars, to 9.76 million cars this year, which would be a 23 percent increase from 7.95 million in 2011.

Together with group companies that make trucks and light vehicles, Toyota now expects to produce 10.05 million vehicles this year, which would make it the first automaker to break through the 10 million mark. The new targets could allow Toyota to win back its standing as the world's largest automaker; in the first six months of 2012, Toyota has been leading General Motors by 300,000 units.

Despite the strong first-quarter showing, Toyota said it would leave its annual profit forecast unchanged at 760 billion yen on 22 trillion yen in sales.

"The latest numbers are not necessarily reflective of our true strength," Takahiko Ijichi, senior managing officer, said in Tokyo.

Continued turmoil in Europe, a slowdown in emerging markets like China and a still-strong yen clouded Toyota's outlook, he said.

"There are various risks, so we feel it is necessary to remain cautious," Ijichi said.

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