- The Washington Times - Friday, May 9, 2008

TOKYO (AP) — Toyota said the strong yen and weaker U.S. sales took a bite out of January-March earnings and projected worse was to come — a 27 percent plunge in its full-year profit.

It would be the first drop in full-year profit in seven years for the automaker.

The results and outlook released yesterday highlight how the tough North American auto market is hammering profits. Meanwhile, unfavorable currency swings added to a growing list of problems for Toyota, including soaring material and energy costs and a stagnant auto market in its home base of Japan.

Still, the company appeared to be faring better than its American rivals. GM lost $3.3 billion in the first quarter. Ford had a surprise profit of $100 million for the same period but expects to lose money this year as the U.S. auto market deteriorates.

Honda, Japan’s No. 2 automaker behind Toyota, said last month that its January-March profit declined 86 percent compared with the same period a year ago because of a corporate tax levied on its Chinese joint venture. Nissan reports earnings next week.

For the fiscal fourth quarter, the automaker reported a 28 percent drop in net profit to $3.05 billion. It was the first decline in quarterly profit since April-June 2005. Sales rose 3.8 percent in the most recent quarter to $63.14 billion.

Toyota had been on a roll with the success of its fuel-efficient models, including the Prius and the Corolla subcompact, which have gotten a boost from rising gas prices.

For the fiscal year ended March 31, Toyota racked up record profit of $16.54 billion — up 4.5 percent from the previous year. That was in line with the projection Toyota gave in February.

Annual sales grew 9.8 percent to $252,8 billion, also a record for the company.

But recent credit woes in North America have dampened sales in recent quarters.

“We are facing a severe business environment,” Toyota President Katsuaki Watanabe said. “Toyota considers this head wind as a valuable opportunity to turn it into a more flexible and stronger company.”

Toyota projects this fiscal year’s profit will tumble to $12.0 billion, while annual sales are seen falling 4.9 percent to $240.4 billion.

The company announced Tuesday before releasing its outlook and earnings that it would raise prices on some U.S. models later this month amid increased worries about its profit growth in the American market.

The price increases, which will start in the middle of May, include a rise of $200 on the 2008 Yaris sedan, boosting the cost of the base model to $12,425, with higher prices for models with extra features. The 2009 Camry will go up $200, to $18,920 for a model without any extras, the automaker’s U.S. unit said. The base hybrid Camry, introduced as a 2007 model in late 2006, will cost $300 more, at $25,650, Toyota said.

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