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As sales recover, Toyota sees 'new beginning'

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As sales recover, Toyota sees 'new beginning'

Christine Tierney / The Detroit News

Toyota Motor Corp., marking a "new beginning" after a deeply damaging series of recalls, reported a recovery today in its financial performance and forecast a further rise in profit for this year.

The Japanese automaker returned to profit in the last fiscal year ended on March 31, after pushing through cost reductions that more than offset the expense of recalling more than 8.5 million vehicles worldwide.

The Japanese automaker forecast a rise in earnings for the current fiscal year which began on April 1, but said the negative financial impact of the recalls and damage to the brand may continue.

Still, President Akio Toyoda offered an encouraging outlook. "I feel that I am now at last standing at the starting point with the latest earnings," he told reporters at Toyota's Tokyo office. "This year will mark a new beginning for Toyota."

Describing his job as steering a ship on stormy seas, Toyoda said the vessel appeared to be sailing toward clearer skies because its employees were toiling together "in one spirit."

However, company officials acknowledged that Toyota still faces uncertainty relating to investigations of safety defects. U.S. safety regulators announced a new probe this week into the timeliness of a past recall to fix steering rods.

While the long-term damage to the company's reputation is unclear, Toyota appears to have weathered the financial impact of a deep global downturn coupled with its own quality issues.

For the year ended on March 31, it reported a profit of 209.4 billion yen, or $2.25 billion, compared with a prior-year loss of $4.3 billion, despite the nearly $2 billion impact of the recall, including lost sales. Toyota's cash and cash equivalents, while down from last year, totaled around $20 billion at current exchange rates.

Toyota said it expected a further improvement in earnings this year, forecasting a profit of $3.4 billion, helped by higher sales in most regions.

Its profit in the January-March quarter, the fourth quarter of the Japanese fiscal year, totaled $1.2 billion, compared with a staggering $7.7 billion loss a year earlier.

"The spectacular financial performance during the 2009/10 fiscal year was largely thanks to swift cost-cutting measures and improvements in fixed costs, while a low base of comparison also helped," said analyst Paul Newton at IHS Global Insight. "The automaker managed to offset sales declines in North America and Europe with growth elsewhere around the world."

This year, Toyota expects to benefit from a recovery in demand in most regions -- except for its home market. The Japanese market is expected to contract after the expiration in September of government incentives for purchases of the most fuel-efficient cars.

The automaker expects industry-wide U.S. auto sales to rise to 11.5 million this year from a low of 10.4 million in 2009, and it expects its own U.S. sales to rise by 5 percent this year.

After a grim start to 2010, when Toyota struggled with millions of vehicle recalls and repairs, the automaker has won back American customers in the last two months after offering unusually high sales incentives, including free maintenance and attractive lease offers.

Takahiko Ijichi, senior managing director, said Toyota expected to spend nearly $900 million this year to underpin sales. But he said the action would not continue indefinitely. Toyota expects to bring incentives back to its historically lower levels "at the latest in the fall, or by the end of the year".

But the automaker's plans will hinge on how quickly it can resolve its safety-related and regulatory problems in the United States. U.S. Transportation Secretary Ray LaHood, in Japan this week, said Toyota may face additional fines on top of a record $16.4 million penalty for failing to report potentially defective pedals in time.

On Monday, the U.S. National Highway Traffic Safety Administration said it was carrying out a new investigation to determine whether Toyota had been slow in recalling vehicles in the United States for a steering defect in 2005. It had recalled vehicles in Japan for a similar problem a year earlier.

President Toyoda, the grandson of the automaker's founder, said today that the company was cooperating with the U.S. investigation, but did not elaborate.

"There's still a long way to go before a full recovery," author Masaaki Sato, who has written books on Toyota, told the Associated Press. "It barely managed to return to the black."

Toyota's forecast earnings for this year would be less than a quarter of the record earnings it posted just two years ago.

From The Detroit News: http://detnews.com/article/20100511/AUTO01/5110374/1148/As-sales-recover--Toyota-sees--new-beginning-#ixzz0newF9Msk

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