Toyota expects profit despite $2 billion recall

TOKYO -- Toyota Motor Corp., faced with a record 8.1 million vehicle global recall, is bracing for a $2 billion hit from its safety lapses -- but still expects a profit this fiscal year.

The world's biggest automaker also raised its outlook for North America, expecting sales of 2.05 million vehicles in the fiscal year ending March 31. That compares with an earlier forecast of 1.97 million just three months ago, before Toyota was engulfed in its recall crisis.

The carmaker's assessment came Thursday, Feb. 4, as it announced third-quarter earnings amid a deepening scandal over its recall crisis. Yet earnings for the three months ended Dec. 31 were markedly upbeat.

Toyota's troubled North American business booked a ¥69.7 billion ($755.7 million) operating profit, reversing a $2.16 billion operating loss the year before. The black ink in the third quarter follows a second-quarter operating profit that ended four straight quarters of red ink in North America, once Toyota's most profitable market.

North American sales climbed 23 percent to 642,000 vehicles in the quarter, from 521,000 a year earlier. Senior Managing Director Takahiko Ijichi credited aggressive cost cutting and a gradual market recovery for the improvement.

Regarding the recalls, Ijichi said Toyota expected to book nearly $2 billion in special costs. It will spend about $1.1 billion to cover direct recall costs, such as fixing the affected vehicles. In addition, the company is expecting another $867.4 million in lost sales, he said.

Toyota factored those costs into a revised full-year outlook, but it is still raising its forecast.

It now expects net income of $867.4 million, after tumbling to its first net loss in decades a year earlier. Just three months ago, Toyota still was predicting a $2.17 billion net loss.

The company also narrowed its projected operating loss to $216.8 million. In November, it was expecting a $3.79 billion operating loss.

Sales, too, are seen improving. Toyota now forecasts it will sell 7.18 million vehicles this fiscal year.

That's up from an earlier forecast of 7.03 million units, but still down from last year's tally of 7.58 million.