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Toyota to cut output in US

Tokyo, February 17, 2010

Toyota Motor Corp said it would scale back production in the crucial US market further, as investors sought guidance from management on how long the sales fallout from an escalating recall crisis would last.

Barely a week after resuming production of eight recalled models at six North American plants, Toyota said on Tuesday it would shut production down at two US factories for a total of at least 11 days to match slowing sales.

Not long ago the envy of the auto industry, Toyota has recalled more than 8.5 million cars worldwide over problems with braking and unintended acceleration in a devastating blow to its reputation built on quality, safety and reliability.

US safety regulators say fatalities alleged by consumers from Toyota's unintended acceleration problems have risen to 34, dating back to 2000.

The latest production cutbacks throw further doubt on the pace of Toyota's earnings recovery after the company had only two weeks ago estimated the recalls to hit global sales by 100,000 units in the financial year to the end of March.

Analysts said they would be looking for any guidance on Toyota's outlook for sales as President Akio Toyoda prepares to brief the media on Wednesday on the progress of the recall of Prius and other hybrid models for braking problems.

'There's no question that sales are suffering (in the United States),' said Mamoru Kato, analyst at Tokai-Tokyo Securities.

'They've estimated a 100,000-unit impact for this financial year. If this multiplies to several hundred thousands next (financial) year, that could lead to a year-on-year fall in sales, and a big hit to earnings,' he said.

The production stoppages are planned on select days between late February and April at its Kentucky and Texas plants.

US regulators added to Toyota's woes on Tuesday by opening an investigation into whether it had acted in a timely fashion to recall cars for acceleration problems.

Toyoda, the grandson of company founder Kiichiro Toyoda, faces one of Toyota's deepest crises just seven months into his job as the massive recalls dent confidence in the automaker.

Toyota is already suffering from declining sales in the United States, its biggest and usually most profitable market, after it suspended sales of about half its inventory of vehicles including the popular Camry and Corolla sedans due to potentially sticky accelerator pedals.

In January, its US sales dropped 16 per cent to the lowest level in more than a decade, and another sharp decline is expected for February since Toyota dealers expect that repairs to inventory will take most of the month to complete.

Some said they saw limited direct damage from the US production cuts announced on Tuesday, and that the bigger concern was to Toyota's image as US regulators address the possibility of any wrongdoing by the automaker.

'Reduction of estimated output of a little over 10,000 vehicles would have only a limited impact, while the move shows Toyota's careful efforts to minimise the impact of a drop in sales and a rise in incentives,' said Nomura Securities analyst Shotaro Noguchi. 

Like most automakers, Toyota books revenue when it produces vehicles and ships them to dealers. By cutting output, it is choosing to take a sales hit to keep inventories of unsold vehicles from rising.

'I can at least say that the news conference today by Toyoda following his first public explanation on recalls last week shows that Toyota has finally begun trying to address the concerns of its stakeholders,' Noguchi added.

Toyota had suspended production of the Sai and Lexus HS250h hybrid models, which carry the same software glitch that delays braking on the Prius, but is set to resume output on February 22, unit Toyota Motor Kyushu said.

Lost production, from February 13 to 22, would amount to 2,500 units.

The probe by the National Highway Traffic Safety Administration could lay the
groundwork for officials to fine Toyota if they determine the manufacturer violated its legal obligations.

It also sets the stage for a congressional review of Toyota's safety crisis set for next week, at which President Toyoda may be called to testify.

Shares of Toyota ended flat at 3,380 yen in Tokyo on Wednesday, while rivals Honda and Nissan gained more than 3 per cent as the dollar recovered to above 90 yen.
 
Toyota shares have fallen a fifth from a recent peak on January 21, wiping out more than $25 billion in market capitalisation.-Reuters




Tags: Toyota | Japan | recall | automobiles |

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