Toyota's profit up; so are its recalls

Toyota Motor Corp. posted yesterday a 39.2 percent gain in profit for its fiscal first quarter, a hefty increase helped by booming U.S. sales and a weaker yen that boosted the value of the Japanese automaker's overseas sales.

Net income for Toyota, the world's second-largest automaker, was 371.5 billion yen ($3.23 billion) for the quarter that ended June 30, up from 266.9 billion yen in the comparable quarter last year. Sales rose 13 percent to 5.64 trillion yen ($49 billion) from 5 trillion yen.


Much of the automaker's growth occurred in North America, where Toyota is soaring on the strength of its reputation for building reliable, fuel-efficient cars.

Sales of Toyota's Tundra large pickup truck and Highlander and Sequoia sport utility vehicles have suffered - along with other carmaker's truck sales - as U.S. gasoline prices push shoppers back into smaller, more fuel-efficient SUVs and passenger cars.


Even an unusually large number of Toyota recalls this year and last haven't dampened U.S. car shoppers' enthusiasm for its cars or the newly redesigned RAV4 small SUV. Sales of the RAV4, in fact, have more than doubled in the first seven months of 2006.

Other hits in Toyota's U.S. stable include the new FJ Cruiser sport utility; the industry-leading Prius gasoline-electric hybrid and the new hybrid version of the Camry sedan; the Corolla compact sedan, all three of the youth-oriented Scion models and the new Yaris subcompact and redesigned Lexus IS sport sedan.

And while sales of the company's best-selling midsize car, the Camry, have dipped slightly this summer, the sedan remains the top family car in the United States. Toyota dealers had sold 248,000 Camrys through July, including 12,409 hybrid models.

"We are seeing the result of a tsunami of new introductions they've had since last year," said auto industry analyst George C. Peterson, president of AutoPacific market research.

"Toyota's got a combination of strong products already on the ground and new products being introduced that's pretty hard to top," Peterson said.

Toyota's U.S. sales are up 10.1 percent so far this year and the company outsold Ford Motor Co. in July to become - for the first time - the No. 2 auto retailer in the United States, behind General Motors Corp.

Cumulative sales through July put Toyota solidly in third place for the year so far, trailing GM and Ford, but well ahead of DaimlerChrysler's Chrysler Group.

Globally, Toyota sold 2.1 million cars and trucks, up 7.3 percent in the fiscal first quarter. Nearly three-quarters of the increase came from North American sales.


"Toyota's got all the important segments and markets covered very well," Ashvin Chotai, a London-based automotive analyst for Global Insight Inc., told Bloomberg News. "Toyota's making money on each car, while GM is just moving metal."

Soaring U.S gasoline prices - up 30 percent over the past year to an average of $3 per gallon - are helping the company, said Takeshi Suzuki, Toyota's senior managing director.

"Consumers are shifting to compact cars as the price of oil surges. Overall profit hasn't been affected since we are paying less in incentives and selling more in the U.S," he said in Tokyo.

Toyota said a weak yen - meaning each dollar or euro is worth more when converted to yen in Japan - increased its first-quarter operating profit by 100 billion yen ($869.5 million).

The company, which has led quality surveys conducted by J.D. Power & Associates, doubled the number of vehicles it recalled in the United States in 2005 and 2006, and this year has had more recalls in Japan than its rivals.

The automaker said Thursday that it would more closely monitor possible defects after a Japanese government probe into recalls.


Toyota also reiterated its earlier earnings forecast for its fiscal year, which ends March 2007, predicting a 4.5 percent net profit decline but a 1.2 percent increase in operating profit and a 6 percent rise in sales revenue.

The company said it expects to sell 8.45 million cars and trucks globally for the fiscal year, with declining Asian sales offset by gains in the United States and Europe.

John O'Dell writes for the Los Angeles Times.