Toyota Downgrades Forecast on Thai Floods, Strong Yen
Toyota Motor Corp on Friday cut its earnings expectations for fiscal 2011 in half, citing a strong Japanese yen and recent flooding in Taiwan for the downgraded outlook. Japan's largest automaker, Toyota said it now expects to earn 180 billion yen ($2.3 billion), less than half of the 390 billion yen it projected it would earn back in August. The company also downgraded its forecast for revenue, from a previously estimated 19 trillion yen to 18.2 trillion yen.
As for actual cars and trucks sold in 2011, Toyota lowered its expectations in that regard from 7.6 million to 7.38 million. The company held off on issuing a forecast when it released first-half results last month, as it was still in the process of determining the impact of recent flooding in Thailand that disrupted the company's parts supply chain.
Overall, 2011 has been a rather forgettable year for Japan's automakers. The industry was brought to a standstill in March when an earthquake and tsunami wiped out a number of plants in Northeastern Japan and affected the supply chains of automakers worldwide, effectively shutting down Toyota, Honda and Nissan production for weeks. Then, when the industry had finally recovered from that disaster, a wave of flooding in Thailand shut down a number of parts manufacturers in Thailand, affecting production of automobiles all around the globe.
The strong yen, meanwhile, has only compounded Toyota's problems as it hit several all-time highs against the dollar this year. And with investors uncertain about the European and US economies, the yen should continue to gain strength over the next few months as investors view the yen as a safer place to park their money. For companies that export a large amount of products out of Japan, like Toyota, a strong yen makes Japanese products less competitive and reduces the value of overseas profits when they're converted back to yen.
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