Toyota Will Cut Japan Output 54% in Current Quarter

A file photograph shows workers checking Toyota Motor Corp.’s Lexus LS600 hybrid sedans on the production line at its Tahara plant in Tahara City, Japan. Photographer: Kimimasa Mayama/Bloomberg News

Feb. 16 (Bloomberg) — Toyota Motor Corp., the world’s biggest carmaker, will slash domestic production 54 percent in the current quarter as demand plunges in the U.S. and Japan.

The company’s output, excluding its Daihatsu Motor Co. and Hino Motors Ltd. units, will drop to about 519,000 vehicles in the three months ending in March, compared with 1.13 million units a year ago, according to figures derived from Toyota’s latest full-year forecast. Toyota spokesman Paul Nolasco declined to confirm the figures.

The worst U.S. car market in 28 years is forcing Toyota to widen production cuts after it slashed domestic output 23 percent in the third quarter. The plunge in car production at Japan’s largest company is contributing to the country’s sharpest economic contraction since the 1974 oil shock.

“This kind of drop is unprecedented, probably since the end of World War II,” said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, which manages about $3.1 billion. “This is terrible.”

Production dropped just 8 percent in the first nine months of the fiscal year. Toyota’s Japan production this year will be about 864,000 units less than in 2007. The shortfall in the fourth quarter accounts for 71 percent of the full-year reduction.

General Motors Corp., the biggest U.S. carmaker, forecasts industrywide vehicle sales in the country may hit a 27-year low of 10.5 million units.

Toyota shares fell 10 yen, or 0.3 percent, to 3,040 yen as of the 11 a.m. trading break. The Topix Index rose 0.7 percent to 769.59. Toyota has gained 4.7 percent so far this year.

Domestic Production

Toyota is suspending some domestic production for 11 days this month and in March and will eliminate 3,000 temporary workers in Japan by March 31. Toyota said on Feb. 6 its operating loss this year may total 450 billion yen ($4.9 billion) this fiscal year, three times an estimate announced less than two months earlier.

“Operating at 50 percent of factory capacity can’t yield a profit,” said Koji Endo, a Credit Suisse Group AG auto analyst in Tokyo. “Toyota wants to complete inventory adjustments by April, but with demand so weak, it may actually take until early May.” Producing at 70 to 75 percent of capacity is the break- even point, he said.

Japan Plunge

Industrywide vehicle sales in Japan fell the most in 35 years last month. Toyota’s fourth-quarter overseas production will drop 45 percent to 623,000 units, based on the company’s full year forecast.

Honda Motor Co., Japan’s second-largest carmaker, is also trimming domestic production to 1.15 million units this fiscal year, compared with an original plan for 1.31 million. The company is eliminating all of its 3,100 temporary workers in Japan, Honda said on Jan. 17.

Nissan Motor Co., the country’s third-largest automaker, is slashing 20,000 jobs worldwide next fiscal year, of which 60 percent will come in Japan. The carmaker’s domestic output will total about 1.1 million vehicles for the year ending March 31, down 289,000 units, or 21 percent, from its original plan in May.

To contact the reporter on this story: Makiko Kitamura in Tokyo at [email protected]; Jason Clenfield in Tokyo at [email protected]

Last Updated: February 15, 2009 22:15 EST
By Makiko Kitamura and Jason Clenfield

Source: Bloomberg

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