Higher Tundra incentives temper Toyota 2Q profit growth

Higher Tundra incentives temper Toyota 2Q profit growth

Hans Greimel
Automotive News
November 7, 2007 - 6:56 am ET

TOKYO - Higher U.S. incentives for Tundra pickups tempered profit growth at
Toyota Motor Corp. in the fiscal second quarter, but the company still
lifted its full-year earnings forecast.

Overall operating profit edged 2.7 percent higher to 596.7 billion yen
($5.01 billion) in the July-September period, compared with 581 billion yen
a year earlier.

The result marked the second-highest quarterly operating profit in Toyota's
history, following the record profit of 675.4 billion yen booked in the
fiscal first quarter.

Second-quarter consolidated revenue climbed 11.2 percent to 6.49 trillion
yen ($57.33 billion).

But in North America, Toyota's biggest market after Japan, second-quarter
operating income actually fell 15 percent to 93.9 billion yen ($829
million).

The decline came despite higher regional sales, which advanced to 735,000
vehicles in the second quarter, from 717,000 units the year before.

Toyota, which announced the results here earlier today, blamed the
lackluster U.S. profits on higher incentives to move the new Tundra, higher
raw material costs and on increased depreciation write downs for three North
American facilities that were expanded last year.

"The momentum has slowed a bit compared with the first quarter," Senior
Managing Director Takeshi Suzuki said. "Tundra and other incentive expenses
were higher than expected."

Toyota did not release figures for its North American incentives. But Suzuki
said sales volume was still increasing and putting the company in position
for future profit growth there.

The U.S. sub-prime loan problem is not expected to hurt business, and Toyota
is standing by its original full-year sales forecast of 2.99 million units
in North America, Suzuki said.

The goal represents a 1.6 percent increase over last year, despite the
overall market slump.

Thanks in part to booming sales in Russia, China and other developing
markets, Toyota lifted a score of full-year earnings targets on Nov. 7, from
its earlier outlook.

Worldwide sales are now seen rising to 8.93 million units in the fiscal year
ending March 31, 2008, up 40,000 vehicles from Toyota's previous forecast.

The company meanwhile boosted its full-year net income forecast by 3 percent
to 1.7 trillion yen ($15.02 billion) and its annual operating profit
prediction by 2.2 percent to 2.3 trillion yen ($20.31 billion).