Toyota Sees Hope For a 2020 Recovery -- WSJ
May 13 2020 - 3:02AM
Dow Jones News
By Sean McLain
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 13, 2020).
TOKYO -- Toyota Motor Corp. said it believed the worst of the
economic impact from the coronavirus pandemic was over and auto
sales could recover by the end of the year in its biggest
markets.
"The lockdown regulations are being lifted in the U.S., and
production is resuming," said Kenta Kon, Toyota's chief financial
officer. In the U.S. and Europe, the combination of a recovering
economy and government stimulus means car sales could rebound to
2019 levels by the end of the year, he said.
Toyota's prognosis was among the sunniest offered by auto makers
after months of a virus-induced economic shutdown. Others have
hesitated to pinpoint a turnaround schedule. Volkswagen AG Chief
Financial Officer Frank Witter said April 29 that "no one has a
clear visibility on the duration and severity of this crisis."
Most car makers are hoarding cash and slashing spending to
ensure they can survive a prolonged downturn. Toyota said it had a
Yen8 trillion ($74.4 billion) cash stockpile, the product of a
decade-long cost-cutting effort. The company said it also was
tapping new credit lines totaling Yen1.25 trillion from Japanese
banks.
Toyota remained cautious in its official outlook, saying both
revenue and sales volume could fall around 20% in the financial
year ending March 2021. Operating profit is expected to fall nearly
80% to $4.7 billion.
Mr. Kon said those figures could be revised upward if Toyota's
projections for a rebound in the U.S., Europe and China prove
correct. Sales were better than expected in April in the U.S., he
said, while China sales have already bounced back to the previous
year's level.
"We believe April was the bottom, and little by little we will
recover," Mr. Kon said.
In the January-March quarter, Toyota said effects of the
pandemic -- including lower sales and provisions against car loans
going bad -- reduced operating profit by about $1.5 billion.
It said net profit declined 86% to $587 million for the
January-March quarter. Still, that was better than profit for its
main competitors. The Japanese car maker earned more than double
the $292 million net profit reported by General Motors Co. for the
same period.
Meanwhile, rival Honda Motor Co. on Tuesday reported a net loss
of $274 million for the quarter and declined to give a forecast for
the current financial year, saying it was too difficult to tell
when sales might rebound.
Toyota said it might delay the development and introduction of
some new models to conserve cash but overall described relatively
little impact on planning from the pandemic, saying it would keep
research and development spending steady this year.
For the full year that ended in March, Toyota's net profit rose
slightly to $19.3 billion. Revenue was nearly flat compared to last
year at $278.5 billion.
The results underlined how far Toyota has gone to make itself an
unsinkable ship, said Chief Executive Akio Toyoda, who took over
the company in 2009 as the global financial crisis hit the
industry.
At the time, Toyota had just reported an annual loss, its first
in decades. That sparked a decade-long effort to impose more
discipline on investments and turn Toyota into a profit machine
that could weather downturns.
The result is that Toyota still expects to make a profit from
its operations in the year ending March 2021, even though it thinks
the hit to its business this year will be greater than the one that
occurred in the global financial crisis of 2008-09.
Toyota board member Koji Kobayashi said this year's results
"would have been a deficit back in the financial crisis." He also
pointed to the cushion Toyota has built. "At the time of the
financial crisis, we had Yen3 trillion cash on hand. Today we have
Yen8 trillion cash on hand," he said.
Write to Sean McLain at sean.mclain@wsj.com
(END) Dow Jones Newswires
May 13, 2020 02:47 ET (06:47 GMT)
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