Global Growth Gives Toyota 29% Rise in Profit

BY TODD ZAUN
The New York Times
August 4, 2004

TOKYO, Aug. 3 - Profit at Toyota Motor jumped 29 percent in the quarter just ended as the company, the world's second-largest automaker, reaped the benefits of an ambitious global expansion with sales rising in every major overseas market.

Toyota reported net income of 286.6 billion yen ($2.59 billion), or 86.22 yen a share, for the quarter ended June 30, compared with 222.6 billion yen, or 64.83 yen a share, in the same quarter last year on growing sales of minivans and sport-utility vehicles in the United States and a big jump in sales in Asia.

Toyota's profit for the quarter was slightly more than the combined profits of General Motors and Ford Motor for the same period.

"This result is exceptionally strong," said Koji Endo, auto analyst at Credit Suisse First Boston in Tokyo. "Almost every time, in the last couple of quarters, the results are beating market forecasts by a relatively big margin."

Toyota, which also makes Lexus luxury vehicles, said that it expected its profit for the fiscal year ending March 31, 2005, to remain near last year's record level.

"Toyota will continue its efforts and work hard to maintain the profit levels of the fiscal year ended March 2004," Ryuji Araki, executive vice president at Toyota, said in a statement.

Toyota's strong profit growth for the quarter just ended was largely the result of solid increases in sales overseas, including a 65 percent jump in sales in Asia. Those rising foreign sales more than offset the negative impact of unfavorable currency fluctuations.

After more than a decade of stagnant vehicle sales at home, Toyota is making a big push to increase sales overseas, building factories in China, Europe and the United States. Toyota's president, Fujio Cho, has set a goal for the company to raise its share of the global auto market to 15 percent by the end of next decade, from about 10 percent now, which would put it on par with industry leader General Motors in sales volume. Last year, Toyota surpassed Ford in global sales to become the world's second-biggest carmaker.

In the United States, Toyota shook off intense competition from Detroit makers who continued to offer large discounts on their cars and trucks. In particular, solid sales of the Toyota Sienna minivan and sport-utility vehicles like the Lexus RX-330, gave a lift to Toyota's bottom line last quarter, analysts said. Toyota's share of the United States market rose to 11.9 percent for the first six months of 2004 from 11 percent in the same period last year.

Meanwhile, Toyota said it would expand production of its Prius gasoline-electric hybrid sedan by half to 15,000 vehicles a month to meet demand for the fuel-efficient cars in the United States. It also said it would delay the introduction of the hybrid version of the Lexus RX-330 until early next year instead of December

Over all, Toyota's revenue for the quarter ended in June increased 10 percent to 4.51 trillion yen ($40.75 billion) from 4.09 trillion yen a year earlier, as its global vehicle sales volume increased 12 percent to 1.79 million vehicles.

Toyota's vehicle sales in Asia for the quarter jumped by two-thirds to 202,000 vehicles, whiles its sales in Europe rose 6 percent to 247,000. In the crucial North American market vehicle sales gained 12 percent to 572,000 vehicles.

The fact that Toyota was able to simultaneously increase sales volumes in all the major overseas markets in the last quarter shows the company has become adept at developing vehicles for very different customers, analysts said. In the last few years, Toyota rolled out a series of new minivans and S.U.V.'s for the United States market, developed new small and inexpensive sedans for Asia and, in Europe, unveiled sporty cars powered by the kind of diesel engines popular there.

"The company has been very successful at introducing the right products," Mr. Endo said. "Toyota seems to be the only volume maker in the world whose sales are growing almost everywhere."

For the fiscal year ending in March 2005, Toyota forecast global sales of 7.2 million vehicles, which would be an increase of 7.2 percent from 6.72 million in its last fiscal year. The company forecast North American sales would increase 5.6 percent, to 2.22 million vehicles.

Toyota said cost-cutting also contributed to its profit growth for the quarter. The company is aiming to cut costs by 200 billion yen ($1.8 billion) for the year ending next March, mostly by simplifying the designs of new vehicles so that more parts can be shared among different models and assembly is easier. Toyota said such cost-saving measures increased its operating profit by 40 billion yen ($361 million) for the quarter just ended.

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