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Toyota hopes for fresh start

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Toyota hopes for fresh start

Return to profit buoys automaker after recall troubles

Christine Tierney / The Detroit News

Toyota Motor Corp. emerged from one of the hardest years in its history with larger-than-expected earnings and a big stash of savings.

But new investigations into the company's handling of safety defects threaten to undermine President Akio Toyoda's efforts to mark a fresh beginning for the automaker founded by his grandfather.

Toyota reported on Tuesday that it had returned to profit in the fiscal year ended 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 fiscal year that began April 1, although officials cautioned that the financial impact of the recalls and damage to the brand may continue to weigh on results.

Despite the roughly $2 billion cost of recalls and lost sales on Toyota's results last year, it earned $2.25 billion, compared with a prior year loss of $4.3 billion. Its cash and cash equivalents, while down from last year, totaled about $20 billion at current exchange rates.

Toyoda offered a mildly encouraging outlook after delivering results that beat the company's forecasts.

"I feel that, given these earnings, we are finally standing at the starting line," he said. "I believe that this fiscal year marks a truly fresh start for Toyota, and I would like to steer the helm toward new strategies for growth."

He said he wanted the company to step up its efforts to develop hybrids and other ecologically friendly cars and to boost its business in emerging markets, such as China and India.

"Toyota will progress by constantly checking not to overreach itself," Toyoda said in prepared remarks, alluding to the rapid expansion that preceded -- and may have led to -- the company's deep troubles last year.

Likening his job to 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."

He had been in the job only a few months when the automaker issued two big recalls to address potential unintended acceleration, followed by smaller recalls for problems ranging from rusting components to braking issues.

The company's prospects dimmed as it recalled more than 6.5 million cars and trucks in the United States, traditionally its most lucrative market.

Given the difficult context, auto analysts were impressed by Toyota's results.

"The spectacular financial performance during the 2009-10 fiscal year was largely thanks to swift cost-cutting measures and improvements in fixed costs," said Paul Newton at forecasting firm IHS Global Insight.

"Despite the recent massive global recall saga, Toyota has released optimistic financial forecasts for the 2010-11 fiscal year," he said. "However, the automaker will have to work hard in the next couple of months to regain consumer confidence if it is to achieve its ambitious sales targets."

Toyota has been trying to restore customer confidence in its vehicles, but its efforts have been undercut by continuing investigations into its handling of safety defects. The U.S. Transportation Department announced this week that it was looking into the timeliness of a recall by Toyota to fix steering rods. Toyoda said Tuesday that the company was cooperating with U.S. investigators but did not elaborate, according to the Associated Press.

During a call with investors, Takahiko Ijichi, a senior managing director at Toyota, estimated that the financial impact of recalls and lost sales on Toyota's results this year would be roughly similar to last year's levels.

While the long-term damage to the automaker's reputation remains to be seen, Toyota appears to have weathered the financial impact of both the recalls and a deep global downturn. 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.

Toyota said it expected further improvement this year, forecasting a profit of $3.4 billion.

From The Detroit News: http://www.detnews.com/article/20100512/AUTO01/5120330/1148/auto01/Toyota-hopes-for-fresh-start#ixzz0nibNt5FE

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