Toyota profits rise on US sales and cost cuts | Business| Economy and finance news from a German perspective | DW | 05.02.2016
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Toyota profits rise on US sales and cost cuts

Strong demand in the US has earned the Japanese auto giant a double-digit increase in net profit in the first nine months of its fiscal year, setting it firmly on track to remain the world's top carmaker.

In the first nine months of its fiscal year, ending in March, Toyota's net profit jumped nearly 10 percent, compared with the same period a year ago, earning the Japanese auto giant 1.9 trillion yen ($16 billion, 14.2 billion euros).

Spurred on by the positive result, Toyota said in a statement on Friday that it was slightly raising its full-year profit forecast to 2.27 trillion yen despite lower sales in most regions of the world, including in Europe and Japan.

Toyota said its positive outlook was mainly supported by healthy growth in the US market where low interest rates proved a boon to consumers and boosted car sales.

Sales in China, the world's top vehicle market, also ticked up, Toyota said, further helping offset weaker demand elsewhere, notably in emerging market economies.

However, Shigeru Matsumura, analyst at SMBC Friend Research Center, identified "potential risks" for Toyota's profit outlook.

"A further slowdown in emerging economies may affect [Toyota's] sales overseas, and an expected rate hike in the United States would dampen customers' appetite" for new cars," he told the news agency AFP.

Production slowdown

On Friday, Toyota announced that all of its Japanese parts plants would shut for a full day next week, due to a components shortage following an explosion at a supplier. It was not clear if the temporary production shutdown would affect results in the current quarter.

"We are going to take all the necessary measures for a speedy recovery of production," Toyota managing officer Tetsuya Otake told a news briefing. "The impact of the suspension is not taken into account in our forecasts, it is difficult to evaluate for the time being," he added.

Toyota also said it would drop its Scion brand, because the US market had been shifting away from small cars amid changing buying habits. The often-quirky line of cars was launched in the US market more than a decade ago and targeted at younger Americans.

Toyota vs. Volkswagen

Toyota's results came after the Japanese carmaker was able to keep the title of world's top automaker for the fourth straight year in 2015, selling 10.15 million vehicles globally and leaving Germany's Volkswagen (VW) and US auto giant General Motors (GM) behind again.

In the first half of 2015, the German carmaker appeared set to take the crown as it rode momentum in emerging economies. But then it posted its first drop in annual sales for more than a decade after being hammered by a massive pollution cheating scandal.

In the meantime, Toyota has been focusing on squeezing out productivity gains and better using existing plants, while putting construction of new factories on hold for several years.

But amid growing demand in car markets, Toyota has announced it was ending the construction freeze as it unveiled plans for a $1.0 billion plant in Mexico, while it is overhauling its operations in China. It also wants to streamline its production methods, vowing to slash development costs to try to offset any downturn in the market.

uhe/kd (dpa, AFP, Reuters)

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