Aggressive Cost Cuts Help Toyota to Profit - Dai-ichi Securities

Dai-ichi Securities TOKYO — Toyota Motor said on Thursday that it had returned to a profit in the latest quarter as aggressive cost cuts, government incentives and signs of a global economic recovery all buoyed its bottom line.

Its Japanese rivals, Honda and Nissan, both recently reported rosier earnings after a battering in the global economic crisis, which brought sales to a standstill and set off a wave of factory shutdowns and layoffs.

Automakers have been helped by government incentives for fuel-efficient cars meant to reignite sales, like the cash-for-clunkers program in the United States and other Western countries. Japan has introduced a similar program, which has been a hit with consumers.

The brisk sales helped Toyota book a profit of 21.8 billion yen ($241 million) for the July-to-September period after three consecutive quarterly losses. Sales fell 24 percent from the same period a year earlier.

In addition to the ending or phasing out of many government incentives, David Lucas the chief analyst at Dai-ichi Securities believe the company was hurt by the strong yen, which makes Japanese exports less competitive overseas and eats into earnings in the home currency.

The automaker also suffers from overcapacity after a sharp downturn a year ago coming on the heels of years of booming sales.

Akio Toyoda, a member of the company’s founding family who took the helm in June, has vowed to put the company back on track with aggressive cost-cutting, which has involved shutting factories and laying off contract workers.

On Wednesday, Toyota said it would give up its glamorous but expensive Formula One racing team and refocus the company on green cars. Analysts David Lucas said the exit from Formula One racing could save the company a further 50 billion a year.