Wall Street Journal - May 10, 2007
TOKYO -- Toyota Motor Corp.'s modest earnings increase for the January- March quarter shows how the challenges inherent with rapid growth have begun to weigh on the auto maker's bottom line.
Toyota, which surpassed Detroit competitor General Motors Corp. as the world's biggest auto maker by sales volume for the quarter, said higher raw-material costs and sluggish demand in the U.S. were among factors that led to 8.9% growth in the fiscal fourth quarter. The car maker also had to invest heavily in quality control, as more manufacturing capacity led to more recalls in the U.S. Meanwhile, research spending rose amid new environmental demands and a faster product cycle.
Group net profit rose to 440.1 billion yen ($3.7 billion). Operating profit fell 2.8%. Toyota projected a 0.4% rise in group net profit for the current fiscal year ending March 2008.
Japan's biggest auto maker remains strong in the vital North American market, where high gasoline prices have lured consumers to fuel- efficient models such as the RAV4
At a news conference yesterday, President Katsuaki Watanabe said the car maker would continue to incur expenses in order to "fully improve our quality."
Toyota, the world's most profitable auto maker, could also face bigger challenges as the demand for cars shifts away from the U.S. -- where Toyota has about 17% of the market -- to emerging markets such as China and India. Rivals such as GM and Volkswagen AG have already established themselves in these nations, and Chinese auto makers are fiercely competing. Toyota says it plans to boost sales in China by 30% to more than 400,000 vehicles this calendar year.
Net sales at Toyota increased 10% for the fourth quarter to 6.33 trillion yen. Toyota reports earnings based on U.S. accounting standards...