Toyota Motor Corp said its biggest-ever safety recall would cost it up to $2 billion this quarter, but raised its outlook for the financial year ending in March after a forecast-beating third quarter.
Toyota's recall of more than 8 million vehicles due to problems with unintended acceleration has punished its share price, dented its reputation and overshadowed what until just two weeks ago had been expected to be an upbeat story of improving earnings.
Car makers enjoyed a boost in demand in the latter part of 2009, thanks largely to government incentives designed to spur sales and improving access to credit as the global economy recovered.
Toyota was one of the biggest beneficiaries of the US cash-for-clunkers scheme but has faced a firestorm of criticism in recent weeks for its handling of recalls centred there.
"There are more doubts about Toyota's ability to make sure clients are content with the quality of its cars," said Benedicte Mougeot, fund manager of HSBC GIF Japanese equity fund, in Hong Kong. "Taking into account the increased risk and reduced profitability, we will review our investment."
With less than two months left in the current financial year, Toyota slashed what most analysts had considered an excessively conservative operating loss forecast to 20 billion yen from a predicted 350 billion yen loss.
That compares with a 38 billion yen annual loss forecast in a survey of 19 brokerages by Thomson Reuters I/B/E/S.
Starmine SmartEstimates, which predicts earnings by putting more weight on recent forecasts of top-rated analysts, has Toyota posting an operating profit of 26 billion yen for the year to March 31, and improving to 647 billion yen next year.
Toyota said the new forecasts for this year took into account an estimated 100 billion yen in costs set aside for the recalls and a further 70-80 billion yen in lost sales, based on an expected hit of 100,000 vehicles in sales globally from the recall saga. The figure was in line with analysts' estimates.
Toyota posted an operating profit of 189 billion yen for October-December, easily beating the 99 billion yen estimated by Thomson Reuters I/B/E/S. It was its strongest profit in six quarters.
Toyota raised its forecast for group global sales to 7.18 million vehicles from 7.03 million for this financial year, and also raised the amount of money it expects to save under emergency profit measures introduced earlier this year to 1.59 trillion yen from 1.25 trillion yen.
"Right now it is difficult to gauge the impact on our sales for next (financial) year," senior managing director Takahiko Ijichi told a news conference in Tokyo.
"But we will do everything we can to regain consumers' trust to limit any impact."
In what could, however, deal a further blow to Toyota's quality record, the automaker is now on the hook to deal with dozens of complaints about insufficient braking under certain conditions on the third-generation Prius.
Reuters