Future Shock: Ford Optimistic, Toyota Forecasts Gloom

Japanese Carmaker Predicts Profit Dip

The previously surging Toyota Motor said yesterday that it expects a 27 percent decrease -- yes, de crease-- in profit in the coming fiscal year, news that came on the same day that long-beleaguered Ford Motor was holding what almost amounted to a love-in at its annual shareholders meeting.

The Japanese automaker has been challenging General Motors in recent months to become the world's biggest vehicle manufacturer, thanks to its high-end Lexus division, its growing light-truck segment and the Camry, which has become the sedan of the American middle class.

The auto giant, which has enjoyed nearly a decade of sales increases, had appeared unstoppable in its march to global dominance.

But Toyota is finally feeling the crippling effects of a strengthening yen at home and the slumping economy in the United States, analysts said. Meanwhile, Ford's decade of poor sales necessitated severe cost-cutting and renegotiated contracts with union employees, which analysts say are starting to yield benefits.

That means that for the first time in years, Ford sees blue skies ahead and Toyota does not.

Last year, it took 120 yen to equal one U.S. dollar. Yesterday, that number had dropped to 104. Auto analyst David E. Cole said that, as the yen grows stronger against the dollar, Toyota's cost for making vehicles skyrockets and its profit sinks.

"Every single yen-to-dollar change is worth $300 million in profit to Toyota," said Cole, an analyst at the nonprofit Center for Automotive Research. "Reality has arrived at the house of Toyota."

The sluggish U.S. economy has caused some of Toyota's drop-off. Toyota North America accounted for 35 percent of the company's fiscal 2008 sales, its largest sales region in the world. Rising gasoline prices are partly to blame: Oil topped $123 per barrel for the first time yesterday; the national average gasoline price is $3.65 per gallon, the AAA reported.

The first half of 2008 was solid for Toyota, the company wrote in its earnings release yesterday. For the year, the company reported $16.5 billion in profit on $253 billion in revenue, up 5 percent and 10 percent, respectively, and both company records.

In the second half, however, "disorder in financial markets triggered by the subprime mortgage crisis and high oil prices resulted in a severe economic condition and a downturn in the world economy," the company wrote.

Toyota North American vehicle sales for fiscal 2008, which ended March 31, were nearly 3 million, but increased by only 15,653 -- a change so small as to be a rounding error. In Japan, which is trying to emerge from an economic slump, fiscal 2008 sales dropped 4 percent, to 2.2 million vehicles.

Shares of Toyota, worth $159.4 billion, closed down $4.20 at $100.56 yesterday.