TOKYO -- Toyota Motor Corp. expects to ease off the growth accelerator a bit. But not quite yet.
After a decade of splurging on new factories around the globe, "We anticipate that capital spending will peak" in the fiscal year ending next March 31, says Toyota President Fujio Cho.
Toyota's global spending on plant and equipment this fiscal year will rise 15 percent to ¥1.25 trillion, or about $11.82 billion at current rates. That is up about 50 percent from $7.45 billion five years ago.
Such spending will drop to $10.24 billion in the year starting April 2006 and to less than $9.31 billion in the year starting April 2007, says Takeshi Suzuki, senior managing director in charge of the finance & accounting group.
Of course, that is "unless volume increases more than expected," he adds.
Because of unexpectedly high demand for new models from a network of plants in Southeast Asia, Toyota is spending to raise that network's capacity to 800,000 from 500,000.
Since 1995 Toyota has expanded its global footprint from 25 manufacturing sites in 18 countries to 51 sites in 26 countries. More factories are in the works: a truck plant in Texas, car plants in Russia and China, and a third plant in Thailand.
But spending on all of that added capacity has depressed profits. Last week at a press conference where he released earnings that were below market expectations, Cho faced repeated questions from analysts who believe that Toyota is chasing volume at the expense of profits.
|Toyota coasts to records|
|A strong 1st half for Toyota Motor Corp. carried profits through a weak 4th quarter.|
|FISCAL 4TH QTR.||FISCAL YEAR|
|JAN.-MAR. '05||% CHANGE||APR. '04-MAR. '05||% CHANGE|
|Revenues||$45.46 billion*||4.2||$172.77 billion*||7.3|
|Operating profits||$3.57 billion||23||$15.57 billion*||0.3|
|Net profits||$2.71 billion||-17.2||$10.91 billion*||0.8|
|Source: Toyota Motor Corp.|
Consider North America. Operating profits there dropped 24.4 percent in the January-March quarter, despite higher sales and revenues. Profits fell because of higher marketing costs, the cost of launching the redesigned Avalon and the cost of auto shows there, Suzuki said.
Marketing costs also rose in Europe, where the Yaris and Avensis were reaching the end of their product cycles. European operating profits fell 37.9 percent in the quarter.
Net profits in January-March slipped for the third straight quarter. Still, a strong April-September 2004 first half allowed Toyota to coast to record revenues and profits in the fiscal year that ended March 31.
The American Big 3 have called for the yen to rise and for the Japanese government to refrain from intervening in currency markets to keep the yen weak.
A stronger yen makes Japanese cars less competitive in the United States. Other Japanese carmakers generally expect the yen to rise in the current fiscal year.
But Toyota predicts the dollar-yen rate will be unchanged over the next year. If it stays at current levels, Toyota hopes "to maintain a similar level of profit" this year, Cho said. But, he implied, profits could fall if the yen rises.
You may e-mail James B. Treece at [email protected]