TOKYO – Toyota Motor Corp., bracing for a 31 percent drop in net income during the current fiscal year, says Japan's devastating earthquake has chopped more than a half-million vehicles from its production plan.
But Toyota said it will start making up for lost output in October, when most of its factories are expected to resume normal operations.
Toyota now aims to finish the current fiscal year with a slight increase in global production, despite shuttering many plants for weeks after the quake.
Toyota lost 220,000 units of output due to the March 11 disaster in the fiscal year ended March 31. And it expects to lose another 450,000 units during the current year ending March 31, 2012.
The automaker could have lost 800,000 units globally during the current fiscal year, but the automaker plans to recover some of those losses by accelerating second-half output.
Toyota aims to produce 350,000 more cars than originally planned in the second half. It will squeeze out extra volume by increasing the number of work days and speeding up assembly lines, Executive Vice President Satoshi Ozawa said while outlining the company's fiscal year financial forecast.
"Toyota is very good at adjusting production rates by improving the tact time and putting more people on the line," Ozawa added. "We will combine all these approaches to boost production."
Production up, sales down
Global output will reach 7.39 million units in the current fiscal year, up from 7.342 million last year, Ozawa said. The figures include the Toyota, Scion, Lexus, Daihatsu and Hino brands.
But the earthquake is expected to cost Toyota an additional 360 billion yen ($4.49 billion) in the current fiscal year, Ozawa said. That comes on top of a 110 billion yen ($1.37 billion) special charge it booked for the quake in the fiscal year just ended.
About 40 billion yen ($499.4 million) of quake-related expenses in the current year reflect payments to secure substitute parts for components knocked out by the disaster, Senior Managing Director Takahiko Ijichi said. Toyota and other Japanese automakers raced to plug gaps in the supply chain with alternative parts.
About 40 percent of the earthquake-related costs were booked for Japan, with the remainder overseas, Ijichi said. Lost U.S. output accounted for the biggest overseas portion.
"This year, we are experiencing a significant loss in market share, and this is attributable solely to supply shortages," Ijichi said. "As supply recovers, so will sales."
Disaster expenses are a big reason Toyota expects net income and operating profit to slide in the current year. The carmaker usually gives full-year forecasts while announcing results of the previous year. But it held off doing so last month due to uncertainty about the quake's impact.
With recovery plans firming up, Toyota now warns that fiscal year net income will drop 31 percent to 280.0 billion yen ($3.50 billion), from 408.1 billion yen ($5.10 billion) last year.
Operating profit is seen falling 36 percent to 300.0 billion yen ($3.75 billion).
Meanwhile, Toyota forecast a 1 percent decline in global sales to 7.24 million vehicles, down from 7.308 million units last year. Despite the increase in overall production, sales will drop because of the lag between production and filling the inventory pipeline, Ozawa said.
Toyota still expects to return to normal production, on a global basis, in November. In Toyota parlance, normal production means being able to fill any order for any car in any trim level.
In terms of raw volume, Ozawa said the company's plants would be operating at the same level as last year in the second quarter, from July to September. And to recoup lost volume, global plants will actually running above original pre-quake plans in October.
Toyota's recovery prospects received a boost on Friday, when Renesas Electronics Corp., the world's No. 1 maker of automotive microcontrollers and a key bottleneck in Japan's parts shortage, said it would resume pre-earthquake shipment levels in September, a month earlier than planned.
Ijichi called Toyota's forecast "conservative," adding that there is still room to increase overseas production and sales beyond the current outlook.
"Domestic production is recovering at a pretty fast clip," he said, adding that as supply increases, Toyota will increase incentives and sales campaigns in North America.
Said Ijichi: "I think we are at the time where we will start using incentives more actively."