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The crisis facing the world's automotive industry deepened this week as Toyota, one of the global elite, revealed it was on course to record its first operating loss in more than 70 years.
A combination of sliding sales and a surging yen has battered profits at Japan's biggest carmaker, which said it expected operating losses for the year to the end of next March to total $1.6 billion (BD590,000,000), a huge turnaround from its previous forecast of a $6.4 billion operating profit.
The profits warning, the second from Toyota in less than two months, marks a dramatic setback for the company in a year which was expected to see it cement its dominance at the top of the global automotive sales league. Toyota is now expected to barely break even.
Toyota's announcement came as the Japanese government released figures showing the biggest drop in exports since records began.
Toyota and other Japanese carmakers have been forced to cut production, slash earnings forecasts and lay-off temporary and part-time workers as they struggle to contain the fallout from the global recession. In the UK, where Toyota employs about 4,600 people, one shift has been suspended, the Christmas break extended and the company is planning further downtime next year.
The grim figures mark the first time Toyota has suffered an operating loss since 1938. "The change that has hit the world economy is of a critical scale that comes once in a hundred years," Toyota's president, Katsuaki Watanabe, said at the firm's headquarters in Nagoya.
Toyota makes most of its profits in the US, where exports fell 34 per cent in November with European sales showing a similar drop and high up among Toyota's problems is the recent surge in the yen against the dollar and euro.
And the situation is not much better at home, however, with warnings that domestic sales of new vehicles will probably fall below five million for the first time in 30 years.
Koichi Ogawa, an analyst at Daiwa SB Investments, described the figures as 'very, very, very bad'. He said: "There is a chance that they could fall into the red in the next business year as well. This is also not just a problem for Toyota. What is good for Toyota is good for the Japanese economy.".
