Toyota Expecting Profits In 2010

Recently, North American chief of Japanese auto giant Toyota Motor (TM), Yoshimi Inaba, revealed that the company’s North American operations would possible become profitable in 2010. The forecast assumed U.S. vehicle sales to reach 10 million units this year and 12 million next. However, Inaba is dubious about returning to the 2007 level vehicle sales of 16 million units soon.

Last month, Akio Toyoda - the newly joined President and grandson of Toyota’s founder Kiichiro Toyoda - expressed views about making the company profitable. He anticipated the annual global vehicle production capacity to increase from 10 million units to 13 million units.

Toyota has been struggling hard amidst weak U.S. sales. In the first six months of the year, the company’s U.S. sales plunged 38%, higher than the overall market decline of 35%. In June, Ford (F) toppled the automaker by occupying the second position in terms of absolute sales figures.

Toyota posted its first annual loss (437 billion yen or $4.4 billion) since 1950 for the fiscal year ended March 2009. Further, management has recently projected net loss to worsen to 550 billion yen ($5.5 billion) for the fiscal year ending March 2010.

Currently, Toyota is seeking to review its U.S. manufacturing strategy. The company has 12 manufacturing facilities in the U.S. Half of these are operating under capacity and one has been idled in Mississippi. It also looks forward to close down the New United Motor Manufacturing, Inc. (NUMMI) plant in Fremont, California. NUMMI is a 50/50 joint venture between Toyota and General Motors (MTLQQ.PK) that produces Corolla and Tacoma for the former and Pontiac Vibe for the latter.

We continue to recommend TM as Hold with a six-month target price of $75.00.

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