Toyota Seen Exceeding GM’s Profit This Fiscal Year

Toyota Profit Seen Tripling as Toyoda Moves Past Disasters
Toyota Motor Corp. vehicles sit lined up waiting dealer delivery at the company's logistics services inside the Port of Long Beach in Long Beach, California. Photographer: Tim Rue/Bloomberg

Toyota Motor Corp.’s profit may climb to a five-year high and exceed General Motors Co.’s earnings this year, signaling Asia’s biggest carmaker is close to full force after reeling from natural disasters and a recall crisis.

Net income at the Camry-sedan maker, which reports financial results tomorrow, may triple to 817.7 billion yen ($10 billion) in the fiscal year ending March 2013, according to the average of 21 analyst estimates compiled by Bloomberg. That’s more than Detroit-based GM’s estimated profit over the next four quarters.

Akio Toyoda, grandson of the founder, is rolling out new Prius hybrids, Corolla compacts and Lexus sedans as he seeks to regain market share in what may be his first crisis-free year since becoming president in 2009. While production has returned to normal, Toyoda now faces a reborn GM that’s No. 1 in global sales, a rising Hyundai Motor Co. and a growing Volkswagen AG that’s dominating luxury-car sales in China.

“This will truly be a test year for Toyoda because the success of a president’s business strategies can really be seen when there are no irregular factors,” said Mitsushige Akino, who oversees about $600 million at Ichiyoshi Investment Management Co. in Tokyo. “He must be coming out stronger because of the many challenges he’s faced, so I think we can look forward to seeing how he narrows the gap against GM.”

Shares Outperform

Shares of Toyota City, Japan-based Toyota rose as much as

1.1 percent in Tokyo trading today. They’ve gained 22 percent this year, outperforming Nissan Motor Co., Honda Motor Co. and GM. The stock has recouped more than half of its losses since the March 11 earthquake and tsunami ravaged northeastern Japan last year.

Toyota may forecast sales will climb 12 percent to 20.8 trillion yen in the 12 months ending March 2013 and top all carmakers in terms of revenue, though not in terms of net income, according to estimates compiled by Bloomberg. VW is projected to earn more.

By volume, the Japanese carmaker said in February that deliveries -- including those of its Daihatsu Motor Co. and Hino Motors Ltd. units -- will increase 21 percent to a record 9.58 million vehicles in the regular calendar year. That would be more than last year’s sales by GM, which hasn’t given a forecast for 2012.

Toyota’s rebound is already under way. Analysts estimate profit during the fiscal fourth quarter jumped fivefold to 140.1 billion yen, the highest in almost two years, as Toyota cranked up production 36 percent and led the Japanese auto industry’s recovery. The yen, which appreciated and eroded the value of Japanese exports in 2010 and 2011, has reversed course by becoming the worst-performing major currency during 2012.

Not Enough

GM last week reported net income fell 61 percent to $1.32 billion on losses and restructuring costs in Europe. Analysts estimate it will earn $7.38 billion over the next four quarters, excluding preferred dividends, which last year totaled $1.61 billion. Volkswagen’s first-quarter profit almost doubled to

3.17 billion euros ($4.1 billion).

Toyota’s fourth-quarter rebound wasn’t enough to keep full-year income from tumbling 33 percent to 272.9 billion yen as the Japanese disaster and subsequent floods in Thailand crippled automotive output, according to the analyst estimates. Toyota wasn’t alone as Tokyo-based Honda last month reported annual profit fell 60 percent and Yokohama, Japan-based Nissan, which reports May 11, has said since February that net income would slide 7.9 percent in the year ended March 2012.

For Toyoda, the natural disasters followed the crisis he oversaw during 2009 and 2010, when defects related to unintended acceleration led to the recall of more than 10 million vehicles -- more than Toyota has sold in its best year.

Toyoda’s Wish

“What we want more than anything is for nothing to go wrong this year,” Toyoda told reporters in Tokyo in March.

After ceding its title as the world’s largest automaker to GM in 2011, not much is going wrong for Toyota in its two biggest markets this year.

Pent-up demand and government subsidies, which last until January, have helped Japan grow faster than any other major auto market this year. Passenger-vehicle sales in the country have jumped 57 percent during the first four months of 2012, led by Toyota’s Prius hybrids, according to the Japan Automobile Dealers Association. That has benefited Toyota, which produces about two out of five vehicles sold in the country.

In the U.S., Toyota’s deliveries have increased 12 percent this year -- outpacing GM, Ford Motor Co., Nissan and Honda -- led by sales of the Camry sedan and the Prius hybrids, as buyers who put off purchases returned to dealerships to find more fuel-efficient models. Total U.S. light-vehicle sales, which rose to a seasonally adjusted annual rate of 14.4 million in April, have exceeded analysts’ estimates three out of four months this year.

China Vulnerability

In Europe and China, where auto sales fell during the first quarter, Toyota has been less vulnerable to slumping demand because it is less reliant on those markets than companies such as PSA Peugeot Citroen and GM. Toyota, which had a global market share of about 10 percent in 2011, accounted for 3.2 percent of Europe’s market and 4.3 percent in China, according to data compiled by Bloomberg.

“Recovering market share in the U.S. won’t be hard for Toyota, but whether they will be able to grow in China and other markets where their presence is weak is going to be a challenge,” said Takashi Aoki, a fund manager at Mizuho Asset Management Co. in Tokyo. “As profitability recovers in the U.S., Toyota should look for ways to utilize that to catch up in China and elsewhere.”

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