Feb. 6 (Bloomberg) -- Toyota Motor Corp., the world’s largest carmaker, said its loss this year may be three times earlier estimates as car sales in the U.S. and Japan plunge and a stronger yen erodes earnings.

Toyota, which today lost the top ratings from Moody’s Investors Service and Standard & Poor’s Ratings Services, said its operating loss in the year ending March may total 450 billion yen ($4.95 billion). The Toyota City, Japan-based company’s previously estimated a 150 billion yen shortfall.

The global recession has crippled sales of Toyota’s Camrys and Lexus LS sedans, propelling the company toward its first operating loss in 71 years. Incoming President Akio Toyoda plans to replace most of Toyota’s top executives to tackle an auto industry crisis that’s forced General Motors Corp. and Chrysler LLC to seek government aid.

“Sales in North America won’t improve any time soon,” said Takashi Aoki, who helps manage about $1.3 billion at Mizuho Asset Management Co. in Tokyo. “I’m expecting a big loss for next year, too.”

The company expects a full-year net loss of 350 billion yen, the first unprofitable year since 1950 due to the “severe automotive market situation.” Bayerische Motoren Werke AG, which competes with Toyota’s luxury Lexus brand, also said today the industry “deteriorated sharply” in the fourth quarter.

Toyota rose 1.6 percent to 3,090 yen at the close of trading in Tokyo, having pared gains after losing its status as the only Asian company rated Aaa by Moody’s. The shares have fallen 47 percent over the past 12 months. The company’s shares in Germany fell 0.8 percent to 26.44 euros.

Cost-Cutting

Toyota has widened the scope of its emergency committee as the carmaker seeks to cut costs “as swiftly as possible,” Executive Vice President Mitsuo Kinoshita said today.

Toyota has cut its forecast three times in the last four months. The yen’s 17 percent rise against the dollar and 18 percent jump against the euro in the last quarter of the year hammered the value of overseas earnings, cutting operating profit by 250 billion yen.

Toyota posted a net loss of 165 billion yen for the three months ended December. The company was expected to lose 195 billion yen in the third quarter, according to the median estimate of three analysts surveyed by Bloomberg. Sales totaled 4.8 trillion yen.

“As the numbers show, we are in an extremely difficult situation,” Kinoshita said. “Since the end of last year, the North American, European and Japanese markets have all worsened.”

“Who wants a car?”

In Japan, industrywide sales fell the most in 35 years last month. The country is headed for its worst postwar recession as factory output slumped an unprecedented 9.6 percent in December and unemployment surged.

Toyota’s sales in the U.S., its biggest market, plunged 32 percent in January, as demand dropped across its model range from the Prius hybrid to the Toyota Land Cruiser.

“Who wants to buy a car now, who would even want to replace one?” said Lilik Takahashi, the chief executive of Piala Capital Management in Tokyo. “It’s all about consumer confidence. Job insecurity and the economic outlook aren’t getting better.”

The industry’s sales have dropped to its lowest since the early 1980s and General Motors Corp. and Chrysler LLC are working to avert bankruptcy with $17.4 billion in loans and face a Feb. 17 deadline to prove they’re viable.

The International Monetary Fund has forecast that U.S. gross domestic product will shrink 1.6 percent in 2009, Japan’s will contract 2.6 percent and the euro area will decline 2 percent.

Toyoda’s Challenge

The carmaker named Toyoda, 52, the grandson of the company’s founder, as president on Jan. 20. He will succeed Katsuaki Watanabe, who will become vice chairman, in June.

Toyoda plans to cut fixed costs by 10 percent, or about 500 billion yen. The carmaker will cut 3,000 temporary workers in Japan by March 31. It is also scrapping night shifts at 27 of its total 75 assembly lines worldwide from January. The company is suspending some domestic production for 11 days this month and in March.

Excluding its Daihatsu and Hino units, Toyota is cutting global production by 1.89 million vehicles this fiscal year, compared with its original plan, according to spokesman Hideaki Homma.

Credit Rating

Moody’s cut Toyota’s rating to Aa1 from Aaa today and S&P cut the rating to AA+ from AAA potentially driving up borrowing costs for the automaker.

The rating downgrade affects $19 billion in long-term Toyota debt, Moody’s said. The company, which had been rated Aaa since 2003, has about 5 trillion yen in cash, according to Moody’s.

The company based its forecast on exchange rates of 100 yen to the dollar and 143 yen to the euro. The Japanese currency traded at 90.94 yen to the dollar and 116.24 yen to the euro today. Every 1 yen gain against the dollar cuts Toyota’s annual operating profit by 40 billion yen.

Last week, Honda Motor Co., Japan’s second-largest automaker, slashed its full-year net income forecast 57 percent 80 billion yen, compared with a previous estimate of 185 billion yen. Honda, the world’s largest motorcycle maker, said rising demand for two-wheelers in Asia helped shield it from the worst of the economic crisis.

Like Toyota, Mazda Motor Corp., Mitsubishi Motors Corp. and Fuji Heavy Industries Ltd. have all forecast full-year losses. Nissan Motor Co., Japan’s third-largest automaker, will report earnings on Feb. 9.

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

Last Updated: February 6, 2009 04:01 EST