Toyota Expects Earthquake, Exchange Rates to Cause 31-Percent Drop in Profits

The latest financial forecasts from Toyota show the company expects full-year profits to decline 31 percent year-over-year, to 280 billion yen (about $3.5 billion) this fiscal year versus 408 billion yen ($5.1 billion) last year. The company attributes the loss to the March 11 disaster in Japan, as well as a fluctuating exchange rate, according to Automotive News.

Supply disruptions, damaged factories, and reduced availability of electricity from the natural disaster have drastically reduced Toyota’s vehicle production capacity as well. The company expects its facilities to return to 90 percent of normal output later this month, with full capacity slated for this November.

Automotive News reports Toyota now plans to build and sell 7.24 million vehicles globally this fiscal year, down from 7.31 million last year. That alone is said to reduce profits by $1.5 billion. In addition, the Japanese yen has been gaining strength in international exchange rates -- Toyota says that could potentially cut profits by another $1.2 billion. Taken together, the impact of the earthquake and the rising value of the yen have reduced Toyota’s fourth-quarter by about 77 percent year-over-year.

Company president Akio Toyoda has said he wants to protect Japanese jobs, but Toyota could be considering more vehicle production outside of the island nation to help combat the unfavorable exchange rate and hedge against other possible production stoppages.

Source: Automotive News (Subscription required)

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