Toyota president feels 'sense of crisis' as profits tumble
05-10-17, 04:16 AM
#1
Lead Lap
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Toyota president feels 'sense of crisis' as profits tumble
http://www.autonews.com/article/2017...profits-tumble
Toyota president feels 'sense of crisis' as profits tumble
May 10, 2017 @ 3:22 am
TOKYO – Foreign exchange rates and spiraling costs hammered profits at Toyota Motor Corp., derailing Japan’s largest carmaker from a 3rd-straight year of record results and spurring President Akio Toyoda to warn of an impending "sense of crisis."
Operating profit tumbled 20 percent to 438.9 billion yen ($3.94 billion) in the carmaker’s fiscal 4th quarter ended March 31. Net income slid 6.6 percent to 398.4 billion yen ($3.58 billion), the company said Wednesday while announcing full-year earnings results.
Revenue increased 6.8 percent to 7.44 trillion yen ($66.87 billion).
Global retail sales advanced 3.1 percent to 2.5 million vehicles in the January-March period, including results from its Daihatsu small-car subsidiary and truck-making affiliate Hino.
The 4th-quarter slump sealed a retreat in full-year profits, with both 12-month operating profit and net income falling from the previous year.
The reversal cut short a run in which Toyota had notched 2-straight years of across-the-board records in full-year revenue, net income and operating profit. It also put Toyota on the path toward another decline in operating profit and net income in the current fiscal year.
'Sense of crisis'
Toyoda said he felt a sense of crisis as the company braced for 2 consecutive years of falling profits and said that Toyota would streamline operations to bolster margins.
“I feel a strong sense of crisis about whether or not we are actually executing car-making from the perspective of the customer in all Toyota workplaces, from development, production, procurement and sales, all the way to administrative divisions,” Toyoda said.
“In the case of sports, booking 2 consecutive years of losses would mean you are failing,” said Toyoda, grandson of the company’s founder. “I hate to be beaten.”
For the full fiscal year ended March 31, operating profit fell 30 percent to 2.85 trillion yen ($25.62 billion), while net income dropped 21 percent to 2.31 trillion yen ($20.76 billion).
Revenue declined 2.8 percent to 18.40 trillion yen ($165.38 billion).
Global retail unit sales inched ahead 1.6 percent to 10.3 million vehicles, for the full fiscal year. Worldwide wholesale deliveries advanced 3.3 percent to 9.0 million units.
Toyota lost its title as the world’s biggest automaker to German rival Volkswagen Group in calendar year 2016, with worldwide volume inching ahead just 0.2 percent to 10.2 million vehicles. But that fell short of the 10.3 million vehicles VW reported selling for a 3.8 percent bump.
Gloomy outlook
Toyoda warned that profits will fall again in the current fiscal year ending March 31, 2018.
Operating profit is expected to slide 20 percent to 1.60 trillion yen ($14.38 billion), while net income is forecast to decline 18 percent to 1.50 trillion yen ($13.48 billion).
Global retail unit sales are seen essentially flat at 10.25 million vehicles, while worldwide wholesale deliveries are forecast to dip 0.8 percent to 8.9 million units.
The reversal is exacerbated partly by spiraling outlays for such things as higher incentives, increased labor costs and ramped up investments in manufacturing sites.
Toyoda said his company has made big advances in developing better vehicles with its new modularized platform. Called the Toyota New Global Architecture, or TNGA, it underpins such nameplates as the redesigned Camry sedan and CH-R compact crossover arriving stateside this year. But the company needs to improve the way it makes vehicles to be more competitive.
“When it comes to making ever-better cars in a smart way, it is becoming apparent that there is still room for improvement,” Toyoda said, adding that the company will focus on streamlining operations in the current fiscal year. Last year, Toyoda recently reorganized the company to create internal sub-companies that are freed to act more independently and nimbly.
It will take time for results of that overhaul to show, he said.
Higher costs
In the just-ended fiscal year, exchange rate losses lopped 940.0 billion yen ($8.45 billion) off Toyota’s operating profit. Higher incentives, labor costs, r&d spending and investments depressed operating profits by another 530.0 billion yen ($4.76 billion), erasing cost cutting efforts.
The company is spending more partly to retool factories for its new TNGA vehicle platform. Toyota embarked on a new era of expansion 2 years ago after taking a 3-year pause on new factories. The offensive began with the introduction of TNGA in the 4th -generation Prius hybrid. The campaign will continue through 2020 with a new factory in Mexico.
Japan anchored full-year earnings as Toyota’s biggest profit center and top-volume markets.
Operating profit in Japan surged 56 percent to 508.2 billion yen ($4.57 billion) in the fiscal 4th quarter ended March 31. For the full year, regional operating profit actually fell, but Japan still generated more profits than the rest of the world combined for the 12-month period.
North America and Europe swung to regional operating losses in the January-March period.
But for the full year, North American finished in the black, with operating profit dropping to 311.1 billion yen ($2.80 billion), from 528.8 billion ($4.75 billion) the year before.
Europe slumped to a fiscal full-year operating loss of 12.2 billion yen ($109.7 million), from a regional operating profit of 72.4 billion yen ($650.7 million) a year earlier.
Regional wholesale volume in North America was flat at 2.8 million vehicles for the full fiscal year, but North America kept its position as Toyota’s biggest market.
European sales advanced 9.6 percent to 925,000 units in the year ended March 3.
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Akio Toyoda: "In sport booking two consecutive years of losses would mean you are failing." Photo credit: Bloomberg
Send us a LetterTOKYO – Foreign exchange rates and spiraling costs hammered profits at Toyota Motor Corp., derailing Japan’s largest carmaker from a 3rd-straight year of record results and spurring President Akio Toyoda to warn of an impending "sense of crisis."
Operating profit tumbled 20 percent to 438.9 billion yen ($3.94 billion) in the carmaker’s fiscal 4th quarter ended March 31. Net income slid 6.6 percent to 398.4 billion yen ($3.58 billion), the company said Wednesday while announcing full-year earnings results.
Revenue increased 6.8 percent to 7.44 trillion yen ($66.87 billion).
Global retail sales advanced 3.1 percent to 2.5 million vehicles in the January-March period, including results from its Daihatsu small-car subsidiary and truck-making affiliate Hino.
The 4th-quarter slump sealed a retreat in full-year profits, with both 12-month operating profit and net income falling from the previous year.
The reversal cut short a run in which Toyota had notched 2-straight years of across-the-board records in full-year revenue, net income and operating profit. It also put Toyota on the path toward another decline in operating profit and net income in the current fiscal year.
'Sense of crisis'
Toyoda said he felt a sense of crisis as the company braced for 2 consecutive years of falling profits and said that Toyota would streamline operations to bolster margins.
“I feel a strong sense of crisis about whether or not we are actually executing car-making from the perspective of the customer in all Toyota workplaces, from development, production, procurement and sales, all the way to administrative divisions,” Toyoda said.
“In the case of sports, booking 2 consecutive years of losses would mean you are failing,” said Toyoda, grandson of the company’s founder. “I hate to be beaten.”
For the full fiscal year ended March 31, operating profit fell 30 percent to 2.85 trillion yen ($25.62 billion), while net income dropped 21 percent to 2.31 trillion yen ($20.76 billion).
Revenue declined 2.8 percent to 18.40 trillion yen ($165.38 billion).
Global retail unit sales inched ahead 1.6 percent to 10.3 million vehicles, for the full fiscal year. Worldwide wholesale deliveries advanced 3.3 percent to 9.0 million units.
Toyota lost its title as the world’s biggest automaker to German rival Volkswagen Group in calendar year 2016, with worldwide volume inching ahead just 0.2 percent to 10.2 million vehicles. But that fell short of the 10.3 million vehicles VW reported selling for a 3.8 percent bump.
Gloomy outlook
Toyoda warned that profits will fall again in the current fiscal year ending March 31, 2018.
Operating profit is expected to slide 20 percent to 1.60 trillion yen ($14.38 billion), while net income is forecast to decline 18 percent to 1.50 trillion yen ($13.48 billion).
Global retail unit sales are seen essentially flat at 10.25 million vehicles, while worldwide wholesale deliveries are forecast to dip 0.8 percent to 8.9 million units.
The reversal is exacerbated partly by spiraling outlays for such things as higher incentives, increased labor costs and ramped up investments in manufacturing sites.
Toyoda said his company has made big advances in developing better vehicles with its new modularized platform. Called the Toyota New Global Architecture, or TNGA, it underpins such nameplates as the redesigned Camry sedan and CH-R compact crossover arriving stateside this year. But the company needs to improve the way it makes vehicles to be more competitive.
“When it comes to making ever-better cars in a smart way, it is becoming apparent that there is still room for improvement,” Toyoda said, adding that the company will focus on streamlining operations in the current fiscal year. Last year, Toyoda recently reorganized the company to create internal sub-companies that are freed to act more independently and nimbly.
It will take time for results of that overhaul to show, he said.
Higher costs
In the just-ended fiscal year, exchange rate losses lopped 940.0 billion yen ($8.45 billion) off Toyota’s operating profit. Higher incentives, labor costs, r&d spending and investments depressed operating profits by another 530.0 billion yen ($4.76 billion), erasing cost cutting efforts.
The company is spending more partly to retool factories for its new TNGA vehicle platform. Toyota embarked on a new era of expansion 2 years ago after taking a 3-year pause on new factories. The offensive began with the introduction of TNGA in the 4th -generation Prius hybrid. The campaign will continue through 2020 with a new factory in Mexico.
Japan anchored full-year earnings as Toyota’s biggest profit center and top-volume markets.
Operating profit in Japan surged 56 percent to 508.2 billion yen ($4.57 billion) in the fiscal 4th quarter ended March 31. For the full year, regional operating profit actually fell, but Japan still generated more profits than the rest of the world combined for the 12-month period.
North America and Europe swung to regional operating losses in the January-March period.
But for the full year, North American finished in the black, with operating profit dropping to 311.1 billion yen ($2.80 billion), from 528.8 billion ($4.75 billion) the year before.
Europe slumped to a fiscal full-year operating loss of 12.2 billion yen ($109.7 million), from a regional operating profit of 72.4 billion yen ($650.7 million) a year earlier.
Regional wholesale volume in North America was flat at 2.8 million vehicles for the full fiscal year, but North America kept its position as Toyota’s biggest market.
European sales advanced 9.6 percent to 925,000 units in the year ended March 3.
Last edited by GS69; 05-11-17 at 06:34 AM.
05-10-17, 05:30 AM
#2
Lexus Fanatic
Amazing how much these guys care about what they're doing. Back in my B school days, they said their compensation is no more than 7X the lowliest paid worker.....do the math.
We seem to take exception when a man makes 300 mil. annually here, but what about guys who make 1+ bil. in a year, did they really create value (hedge fund mgrs sorry if that's you, it's just food for thought). But closer to the car industry, I can think of a person who ruined a home center store, took a $75 mil. package, and went on to ruin Chrysler after that. Different way of looking at things....where it's not personal....
We seem to take exception when a man makes 300 mil. annually here, but what about guys who make 1+ bil. in a year, did they really create value (hedge fund mgrs sorry if that's you, it's just food for thought). But closer to the car industry, I can think of a person who ruined a home center store, took a $75 mil. package, and went on to ruin Chrysler after that. Different way of looking at things....where it's not personal....
05-10-17, 06:33 AM
#3
Lexus Fanatic
All of the money that Toyota paid out, several years ago, to settle the unintended-acceleration claims and retro-fit their cars in its aftermath probably also had an impact. Those who predicted it would hurt the company in the long run were (apparently) right.
05-10-17, 07:22 AM
#4
Pole Position
Well perhaps damage to its reputation, which was short lived anyways. Those costs would have been incurred and expensed in the year that it happened already. The thing that hurt them was spending R&D on low volume products like the RC series, GSF, LC and going back into racing. Combined with declining sales of current models, factory expansions, TNGA and new engine R&D and roll outs, puts a strain on human and capital resources. So it is no surprise their profits are dropping. Oh higher incentive spending definitely doesnt help either.
05-10-17, 08:35 AM
#5
Lexus Fanatic
Personally, I wonder about the "unintended acceleration." There was one incident in CA that was a complete hoax. When you're big, you've got a target on your back. I found out about this situation when I discovered 2 mat hooks missing in my LS430.
Riddle me this--how come when BMW contracts with that USA co. that advertises floor mats on the radio, and imho it is measured wrongly (maybe they used an auto as a template), nothing ever becomes of it? No class action, no lawsuits, and these are OEM branded mats. It always gets caught in the clutch.
Riddle me this--how come when BMW contracts with that USA co. that advertises floor mats on the radio, and imho it is measured wrongly (maybe they used an auto as a template), nothing ever becomes of it? No class action, no lawsuits, and these are OEM branded mats. It always gets caught in the clutch.
05-10-17, 11:13 AM
#6
There was nothing wrong with the Toyota accelerator pedal software. Toyota yielded to the American lawyers when they should have fought back.
But in my view that's not what's happening to profits now. They have designed some butt-ugly auto front ends in recent years and the public is saying so with their dollars.
But in my view that's not what's happening to profits now. They have designed some butt-ugly auto front ends in recent years and the public is saying so with their dollars.
05-10-17, 12:00 PM
#7
Lexus Fanatic
But in my view that's not what's happening to profits now. They have designed some butt-ugly auto front ends in recent years and the public is saying so with their dollars.
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05-10-17, 12:55 PM
#8
Lexus Fanatic
From what I am reading, I translate it like this:
Toyota has let their bread and butter platforms of the Camry go on for far too long. The Tundra is using an aging design. Flagship products like the LS, LX, Land Cruiser, are all using engines and platforms that date back to 2006-07. Add in their reluctance to update the Tacoma/Tundra properly and the terrible neglect of the Sequoia = people are not willing to pay more for their Toyota and upgraded Toyota in a Lexus.
Toyota has let their bread and butter platforms of the Camry go on for far too long. The Tundra is using an aging design. Flagship products like the LS, LX, Land Cruiser, are all using engines and platforms that date back to 2006-07. Add in their reluctance to update the Tacoma/Tundra properly and the terrible neglect of the Sequoia = people are not willing to pay more for their Toyota and upgraded Toyota in a Lexus.
05-10-17, 01:27 PM
#9
Lexus Test Driver
Odd statement as according to TMC's own annual report, operating income only went down due to forex - had the yen stayed at the same levels as last year, their operating income would actually have gone up. Maybe it is a political statement to try to get the Bank of Japan to engage in further currency manipulation.
What does this have to do with anything? Unit sales were up, revenue was up, and income would have been up if not for a weak yen. They paid out those claims and did the recalls years ago, and the cost was a mere fraction of annual operating income.
What does this have to do with anything? Unit sales were up, revenue was up, and income would have been up if not for a weak yen. They paid out those claims and did the recalls years ago, and the cost was a mere fraction of annual operating income.
05-10-17, 02:08 PM
#10
All manufacturers are facing the same shock waves; new vehicle sales are at record highs with little room for growth. Also consider the fact that the fed is raising interest rates and requiring higher credit scores to get approval for a loan (many recent new buyers are defaulting.) So consider 20 manufacturers all fighting for a piece of the car sales pie. It's not a great outlook. Competition is at an all-time high.
05-10-17, 03:08 PM
#11
Lexus Fanatic
That's assuming all of the cases are finally settled. It often takes years to get through the appeals-process today,
05-10-17, 06:12 PM
#13
Lexus Fanatic
In fact, often, those older platforms and engines are a silver lining in disguise.....they are well-tested, well-proved, and have most of their initial defects corrected for good reliability.
05-10-17, 06:33 PM
#15
Lexus Test Driver
Originally Posted by BrickHead
Do away with the hedious designs! Toyota/Lexus make some of the ugliest vehicles - Murai, Prius, and the infamous spindle grills on all Lexus!