Toyota chief says he’s looking at spending cuts as profit slides

TOKYO President Akio Toyoda said the auto maker may have to take a closer look at which areas to invest after forecasting profit will decline for a second straight year.

“In an environment where sales are stagnating, it’s tough that we need to invest in areas which won’t generate profits due to paradigm shifts,” Toyoda said at a briefing in Tokyo on Wednesday, without being more specific. “We need to make the decision to look at where to stop when sales are stagnating.”

A back-to-back profit decline would be the first for Japan’s largest auto maker since 1994 and a setback for Toyoda, who has made it a goal to insulate the company from the boom-and-bust cycles in the auto industry.

Toyota posted a loss in 2009 after the collapse of Lehman Brothers Holdings Inc. sent the global economy into a downward spiral.

Part of the problem, the 61-year-old executive says, is Toyota’s size and history.

Despite creating in-house companies last year to speed up decision-making and make the auto maker more responsive to changes in the industry, it’ll take more time before the results are apparent, Toyoda said. “We posted a loss after the Lehman shock. The fact that we troubled many of our stakeholders then has been rubbed in my soul,” Toyoda said.

Toyota could look to cut back on spending more on conventional cars and instead focus on hybrid, plug-in hybrid and electric vehicles, according to Edwin Merner, president of Atlantis Investment Research Corp., which owns the auto maker’s stock.

“If you don’t have these things, then you could end up being at a very big disadvantage,” he said.

While the Japanese auto maker may increase production capability overseas in the US, Europe and India, at home it will look to automate more rather than increase capacity, Merner said.

“The main focus will be cutting your production costs per car to become more efficient,” he said.

Toyota forecast operating profit to fall 20 per cent to 1.6 trillion yen (RM63 billion) in the fiscal year through March, based on expectations for an increase in US incentive spending and the yen appreciating to 105 yen to the dollar. —WP-Bloomberg