TM Toyota Motor Corporation

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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