Toyota earnings streak continues

August 04, 2007|By New York Times News Service

TOKYO -- Toyota Motor reported a 32 percent rise in quarterly profit yesterday, continuing a streak of record earnings as the Japanese car company overtakes General Motors as the world's largest automaker.

Toyota also said it expects its sales in the all-important North American market to remain as strong as they were last year, despite a sales drop last month and broader concerns of a possible U.S. economic slowdown.

Toyota said it saw brisk sales during the April-June quarter in the United States, where high pump prices raised the popularity of high-mileage vehicles like Toyota's Prius, a gasoline-electric hybrid, and RAV4, a small sports utility vehicle. Toyota reported sales gains in every region of the world except its home market of Japan, where the auto market is saturated.

Analysts said this showed Toyota could be building a formidable lead in global markets over GM, which has recently relied on strong overseas sales to offset its weakness in the United States. Toyota also is trying harder to sell cars in newer markets such as China and Russia to reduce its current dependence on the United States, the world's largest auto market, analysts said.

"Toyota will be No. 1 in sales this year, without a doubt," said Shinji Kitayama, a senior analyst at Shinko Securities in Tokyo. "One of Toyota's strong points is that its cars sell well all over the world."

In the first three months of this year, the Toyota group, which includes minicar maker Daihatsu and truck producer Hino Motors, outsold GM, a first in 76 years, by 109,000 vehicles.

Toyota also said its profits got a boost from a weak Japanese yen, which makes its products cheaper in overseas markets. Detroit automakers have grumbled that the weak currency gives Japanese rivals an unfair advantage. This week, sales statistics showed that foreign-brand autos outsold the Big Three in the United States for the first time ever.

Despite yesterday's upbeat earnings, analysts said concerns remain whether Toyota can keep its momentum, especially if the yen stopped falling against the dollar. They said another fear was that recent problems with subprime mortgages in the United States might spread into other types of lending, including financing of autos.

Analysts said Toyota and other carmakers could face losses if American consumers start defaulting on auto loans.

There are also concerns that the subprime problems could seep into the overall U.S. economy, causing a slowdown that couldhurt auto sales. Such concerns were fed earlier in the week, when automakers including Toyota reported drops in sales during July.

"Looking forward, the biggest questions now are what will happen with the subprime finance problems and U.S. sales," said Atsushi Kawai, an analyst at Mizuho Investors Securities in Tokyo.

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