March quake in Japan didn’t hurt Toyota as badly as the increasing yen

Article by Christian A., on October 13, 2011

The March quake in Japan didn’t hurt Toyota Motor Corp. as badly as the increasing yen. The average approximation of five analysts interviewed by Bloomberg revealed that the company's operating profit is going to be reduced by 250 billion yen or $3.3 billion in the year ending March 31 due to the currency's progress.

According to Toyota in August, the natural catastrophe could cost 160 billion yen. Automobile analyst Issei Takahashi at Tokyo-based Credit Suisse Group commented that there is pent-up demand and with production back to normal, the automaker can quickly make up for the reduction in output due to the earthquake.

The analyst added that it is more of the "reality of the strong yen" that the automaker needs to deal with. Toyota builds two out of five automobiles in Japan, which makes it more susceptible to the yen compared to Honda Motor Co and Nissan Motor Co.

The currency's climb to a postwar high versus the dollar in August -- and the strongest within 10 years against the euro last month -- is a further challenge to Toyota, which has been outsold by Volkswagen AG and General Motors Co. in the first six months of the year.

Toyota's Chief Financial Officer Satoshi Ozawa admitted in October 10 that they are "struggling," adding that they have to lower production costs to compensate for the currency situation. This could possibly include transferring production from Japan "to some extent," he explained. [source: Bloomberg]

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