Toyota Expects Its First Loss in 70 Years

TOKYO — Toyota Motor, the Japanese auto giant, said Monday that it expected its first operating loss in 70 years, underscoring how the economic crisis was spreading across the global auto industry.

On Monday, Toyota said it expected an operating loss in its auto operations of 150 billion yen, or $1.7 billion, for the fiscal year ending March 31. That would be the company’s first annual operating loss since 1938, a year after the company was founded, and a huge reversal from the 2.3 trillion yen, or $28 billion, in operating profit earned last year.

Analysts said Toyota’s downward revision, its second in two months, showed that the worst financial crisis since the Depression was threatening not just the Big Three but also even relatively healthy automakers in Japan, South Korea and Europe. Many other companies will also soon be reporting losses.

Worse, analysts said that they expected next year to be even more painful, amid forecasts that the global economy would continue to slide until at least the summer. This could cause a significant shakeout, driving smaller and weaker companies into the arms of a smaller number of bigger, richer players.

“It is just a matter of time before all major automakers are losing money,” an auto analyst in Tokyo for Credit Suisse Securities, Koji Endo, said. “And things will just get worse next year, when companies start losing money for the second consecutive year.”

Toyota, which just a few months ago seemed unstoppable after eight years of record profits, said it suffered from plunging vehicle sales not only in North America but also in once-promising markets like India and China, which many had hoped would prove immune to the United States malaise. Toyota’s group includes the automaker Daihatsu and the truck builder Hino.

“The change in the world economy is of a magnitude that comes once every hundred years,” Toyota’s president, Katsuaki Watanabe, told a news conference in Nagoya, Japan, near the company’s Toyota City headquarters. “We are facing an unprecedented emergency.”

Mr. Watanabe said the company would respond by suspending investment in new plants, including last week’s announced postponement in the start of a factory in Mississippi, and moving some production lines to single shifts. The company has even unplugged electric hand dryers at some offices in an effort to cut costs.

Yet Toyota said it still expected to report a small net profit, helped by interest and dividend income as well as tax-related savings of 50 billion yen, or $560 million.

With some $18.5 billion in cash, and relatively little debt, Toyota is still in far better shape to weather the downturn than General Motors and Chrysler, which on Friday received $17.4 billion in emergency loans from Washington.

In Japan, the recession could force a realignment of the country’s eight automakers, which are globally competitive but have begun feeling increasing pain from the global downturn.

The biggest drops have come in the United States, traditionally the Japanese companies’ most profitable market. After years of increasing market share at Detroit’s expense, sales at Japanese companies are sharply lower. In November, Toyota’s sales dropped 33.9 percent and Honda Motor’s 31.6 percent, both faring slightly better than G.M., which had a 41 percent decline.

Sales are also down in their home market of Japan, both because of the financial crisis and because of longer-term demographics in this rapidly aging society. Last week, an industry group announced that new car sales in Japan would drop next year below five million vehicles for the first time in 31 years.

Japan’s automakers have responded by slashing production by 2.2 million vehicles in the current fiscal year. They have also cut profit forecasts, laid off nonstaff workers and delayed investment in new factories. Last week, Honda Motor, the nation’s second-largest carmaker, reduced its profit forecast by two-thirds for the current fiscal year.

The auto slowdown has helped worsen an increasingly nasty recession in Japan’s export-dependent economy, the world’s largest after the United States. On Monday, Japan finance ministry said exports dropped 26.7 percent in November, the largest drop since statistics started being kept in 1980, to push the nation into a rare trade deficit for the month.

The financial turmoil has also hurt carmakers by driving up the value of the Japanese yen, which has risen some 25 percent since summer. A higher yen makes Japanese autos and other products more expensive overseas.

On Monday, Toyota cited the currency as one reason for revising its forecast. Analysts say Toyota has been seen as the most vulnerable of Japan’s big automakers because it has been investing heavily in new products, including a full-size pickup truck for the United States market, just as auto sales started to fall.

“They’ve caught the same cold that Detroit has caught,” said Christopher J. Richter, senior analyst in Tokyo at Calyon Capital Markets Asia. “Everything is going wrong for Toyota this year.”

Toyota also lowered its worldwide vehicle sales forecast for the fiscal year to 7.54 million vehicles, far below the 8.9 million vehicles it sold last year. It said the decline would be particularly large in North America, where it forecast it would sell 2.17 million vehicles this fiscal year, down from 2.96 million last year.