Toyota Motor Corporation (NYSE:TM) is reeling from a strong yen, and the Thai floods that severely severed its supply lines this year. The world’s current top-selling automaker is poised to fall from that spot as the companies production capabilities have been devastated this year.
Toyota is expecting to be overtaken in sales this year by General Motors Company (NYSE:GM) and probably by Volkswagen AG.
“Toyota is hitting a trough,” said Cho Soo-Hong, auto analyst at Woori Investment & Securities in Seoul. “Its market share will recover next year with output normalization and new model launches, but I don’t expect too much from Toyota’s earnings as the yen is expected to remain strong because of appetite for safe-haven assets.”
Japan’s top automaker expects operating profit to fall 57% to 200 billion yen in the year to end-March, well below a consensus forecast of 419 billion yen in a survey of 23 analysts by Thomson Reuters I/B/E/S.
Toyota’s previous forecast of 450 billion yen, issued in August, was withdrawn last month after Thailand’s worst floods in 50 years cut off the supply of parts to Toyota’s factories in 10 countries. Toyota said the floods would effectively cost the company 230,000 vehicles in lost production this business year.
Toyota said the floods accounted for 120 billion yen of the downward revision to operating profit, while the yen’s strength, which makes exports less competitive and eats into overseas profits when brought back to Japan, cut another 190 billion yen.
Chief Financial Officer Satoshi Ozawa expressed deep frustration with the firm yen, which Tokyo has failed to weaken through intervention, warning that current exchange rates could threaten Japan’s very foundation as an export-driven economy.
“The revision is partly because Toyota’s exposure to currency swings is big, but I think it also brought to light the severity of the crisis Japan is in, because the country is founded on its export strength,” Ozawa told a news conference.
Shares of Toyota were trading at 67.07, down 0.09% at 9:37 am ET today.