May 8 (Bloomberg) -- Toyota Motor Corp., the world’s largest automaker, cut its annual dividend for the first time and predicted a loss that’s almost twice analysts’ estimates as global car demand plunges.

The loss may total 550 billion yen ($5.5 billion) for the year ending March 2010, compared with a loss of 436.9 billion yen a year earlier, the company said in a statement today. The maker of Lexus LS sedans and Corolla small cars was expected to forecast a loss of 284 billion yen, according to the median of 17 analyst estimates compiled by Bloomberg.

The 72-year-old automaker’s loss was 766 billion yen, or $8.2 billion, for the three months that ended in March, capping its first annual deficit in 59 years. For the quarter, Toyota’s loss was wider than General Motors Corp.’s $5.98 billion and Ford Motor Co.’s $1.43 billion.

“All Toyota can do now is save costs as much as possible and wait until the uproar subsides,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments Ltd. in Tokyo, which manages $28 billion. “The company needs to build a foundation to turn profitable next fiscal year.”

Incoming President Akio Toyoda, 53, will be responsible for reviving sales and cutting costs as rising unemployment and falling wages in the U.S., Europe and Japan sap car sales. Toyota said it lowered the dividend to stem further losses.

Bond Plans

Separately, Toyota registered to sell as much as 700 billion yen in bonds, according to a filing to the Japanese finance ministry today. The two-year registration goes into effect on May 16, the filing said.

Standard & Poor’s cut Toyota’s long-term credit rating by one level to AA, the third-highest investment-grade ranking, from AA+. A lower rating may boost borrowing costs.

Toyota’s American depositary receipts fell $1.07, or 1.3 percent, to $79.17 at 4:04 p.m. in New York Stock Exchange composite trading. They have gained 21 percent this year.

Toyota will pay a second-half dividend of 35 yen a share, compared with 75 yen a year earlier. The cut ends a streak in which the annual dividend jumped sixfold in 10 years. Toyota pays dividends twice a year. In 2008, the payouts totaled 140 yen a share.

Industry Turmoil

The lower forecast and dividend cut come as the credit crisis, sparked in the U.S. last year, has crippled car demand worldwide and led to a reshuffling of the auto industry. In the U.S., Chrysler LLC filed for Chapter 11 bankruptcy protection on April 30 to reorganize with Italy’s Fiat SpA. GM, the largest U.S. automaker, faces a June 1 deadline to restructure outside of bankruptcy courts.

In Europe, Porsche SE’s controlling shareholders, the Porsche and Piech families, agreed to create a combined company with its Volkswagen AG unit on May 6, ending the sports-car maker’s bid to increase control over Volkswagen, Europe’s largest automaker.

Toyota forecasts an operating loss of 850 billion yen this fiscal year, compared with an operating loss of 461 billion yen a year earlier.

Vehicle sales may fall 14 percent to 6.5 million in the 12- month period, Toyota said. North America sales may fall 16 percent to 1.86 million vehicles, the company said.

Toyota aims to cut production-related costs by 340 billion yen and fixed costs by 460 billion yen this fiscal year. The automaker, which has already decided to eliminate bonuses for board members, said last month it will reduce managers’ summer bonuses in Japan by 60 percent.

Spending Cuts

The maker of Prius hybrid cars also plans to slash its capital spending by 36 percent to 830 billion yen and research spending by 9.3 percent to 820 billion yen.

The company plans to release four new hybrid vehicles in Japan and three new ones overseas this fiscal year. The company cut production-related costs for the new Prius by 30 percent, compared with the previous version, President Katsuaki Watanabe said at a press conference.

“We can make up for a drop in sales with the cost reduction,” he said. Still, “it’s not enough to cover” a stronger yen.

Toyoda, the grandson of the company’s founder, was named president on Jan. 20. He will succeed Watanabe, who will become vice chairman, in June. Toyoda has replaced some of Toyota’s top executives to guide the company through the industry crisis. In February, he rehired Yoshimi Inaba to help improve North American sales and assembly operations.

Strong Yen

Japanese automakers are struggling to offset the yen’s 13 percent average gain against the dollar last quarter, which is eroding the value of sales in the U.S., the world’s biggest auto market. Industrywide sales in the U.S. tumbled 37 percent in this year’s first four months.

“Toyota may be forecasting a loss, but I think they will be very aggressive in cutting costs to turn a profit in the end,” said Toshio Konishi, who helps manage about $1.3 billion at Polar Capital Partners in Tokyo, including Toyota shares.

Every 1 yen gain against the dollar and euro trims annual operating profit by about 30 billion yen and 4 billion yen, respectively, Toyota said today.

The company based its full-year forecast on exchange rates of 95 yen against the dollar and 125 yen per euro, compared with 101 yen and 144 yen last year.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.

Last Updated: May 8, 2009 16:11 EDT