Toyota in the red for first time in 59 years

Toyota, the world's largest car maker, has reported its worst financial results ever and has seen its credit rating downgraded.

The Toyota Motor Corporation lost 765.8 billion yen ($13 billion) in the first three months of 2009, bringing the loss for the year to 436.94 billion yen($7.4 billion).

Toyota has lost money only once before since its foundation in 1937: in 1950, when Japanese industry was recovering from the war, it also went into the red. Since then its history has been an almost uninterrupted success story.

But this year its financial performance has been even worse than that of General Motors.

Toyota overtook GM to be the world's number one manufacturer last year, but sales are down 22 per cent. The firm sold 7.6 million vehicles last year, down from 8.91 million vehicles in 2007-08. Next year it expects to take another hit of about 1 million units, to 6.5 million vehicles.

Standard & Poor's lowered its long-term credit rating on Toyota one notch to AA, its third-highest rating, adding a "negative" outlook. However, S&P added that Toyota "maintains a minimal financial risk profile, characterised by a strong capital structure with massive liquidity".

The company has been laying off workers or cutting production at plants in America and Japan and has implemented short-time working at its UK operations in an engine factory in Deeside and an assembly plant making the Avensis. It has reduced the number of temporary workers in Japan from 9200 last year to 3000.

Katsuaki Watanabe, the company's president, said the devastating results were caused by "the significant deterioration" in vehicle sales, particularly in the US and Europe, and the strong yen, which makes the 50 per cent of Toyota cars still made in Japan, such as their luxury Lexus cars, relatively uncompetitive. He also blamed the rising cost of raw materials.

Global car demand has seen an extraordinarily synchronised downturn, with demand off between 25 and 50 per cent in Toyota's major markets. Normally a globally diversified operator such as Toyota benefits from its international spread, taking advantage of the different timings of the economic cycle in different markets; but the uniform worldwide downturn has left the car giant with no hiding place from collapsing demand for its products.

The purchase of a "big ticket" item such as a car is usually postponed when consumer confidence slumps; the durability of modern cars also allows motorists to put off replacing their transport.

Toyota says it will now concentrate on hybrids, such as the Prius, and smaller cars.

- INDEPENDENT