In Rapid Turnaround, Toyota Is on Track to Post Record Earnings
TOKYO — While the American automakers have made drastic comebacks since the recession, no car company has had a bigger revival than Toyota.
After enduring huge recalls, a tsunami in Japan and a steep drop in sales because of slowing demand, Toyota on Tuesday hit a milestone in its comeback, saying it was on pace to earn its biggest-ever annual profit in its fiscal year that ends in March.
The Japanese company projected that it would earn net income of 1.9 trillion yen for the year, or about $18.8 billion. That figure would surpass the profit of ¥1.7 trillion it reported six years ago, before the global financial crisis.
The annual profit will also easily exceed the combined earnings in 2013 for General Motors, Ford and the Chrysler division of Fiat Chrysler Automobiles, and will help bankroll Toyota’s continued expansion.
It is a rapid turnaround for a company that nearly lost its reputation for quality when millions of its cars were recalled for problems with unintended acceleration.
Under its chief executive, Akio Toyoda, the company has hastened cost cuts, streamlined its global organization chart and increased its emphasis on newer models, flashy designs and fuel economy. The company has also continued to resolve lawsuits stemming from the recalls.
“They went through a lot over the past four years and they have learned from it,” said Karl Brauer, an analyst at the auto research firm Kelley Blue Book.
Still, the mood on Tuesday at Toyota’s offices here was less than joyous, with executives expressing caution about the global markets’ recent jitters.
“The outlook, especially for emerging markets, is very unclear,” the company’s managing officer, Takuo Sasaki, said at a news conference. “We need to stay vigilant of any adverse effect the recent financial instability may have on the real economy and auto markets.”
The company has faced difficulties, starting with the financial crisis in 2008 that crippled sales volumes in North America and Europe.
In 2009 and 2010, it recalled over 10 million vehicles for a variety of problems tied to unintended acceleration of several of its models. And in 2011, it lost significant production after the earthquake and tsunami in Japan.
“Everything went so wrong so quickly for Toyota,” Mr. Brauer said. “It was almost surreal because Toyota was never known to slip up.”
Last year, Toyota was the best-selling automaker in the world for a second consecutive year, beating out G.M. and Volkswagen of Germany.
Toyota sold 9.98 million new vehicles in 2013. This year, it could become the first automaker to sell more than 10 million new cars, trucks and sport utility vehicles, if it meets its targets.
The company’s turnaround has benefited from several factors, including a weaker yen, which is inflating the value of its earnings overseas. Toyota has also moved more manufacturing production out of high-cost Japan, and invested heavily in new products.
In the United States, sales of its bread-and-butter Toyota brand vehicles rose 6.7 percent in 2013, which lagged the overall market increase of 7.6 percent.
But its higher-priced Lexus luxury division reported an increase of 12.2 percent, which fueled growth in its overall profit margins.
Newer models like the Toyota Avalon sedan and RAV-4 sport utility vehicle were particularly big sellers. And its revamped Lexus ES sedan strengthened what was already a competitive luxury lineup.
Net profit soared in the company’s most recent quarter that ended in December. For the period, Toyota earned ¥525.4 billion, about $5.2 billion, up from ¥99.9 billion in the similar period the previous year. Revenue for the quarter climbed 24 percent to ¥6.59 trillion.
Company officials on Tuesday played down pressure from investors to use the company’s cash holdings to increase its stock dividend or build new factories in major markets like the United States and China.
Instead, Toyota executives vowed not to repeat its overheated expansion strategy of the mid-2000s, which left the company vulnerable to sinking sales during the recession.
A year after its previous record profit in 2008, Toyota plunged to its biggest loss in history.
“We will not build factories first and then wait for markets to materialize,” Mr. Sasaki said. “We will consider expansion only when it becomes clear that production cannot possibly keep up with sales, and we are not there yet.”
Despite the surge in profits, Toyota faces challenges to increase its share in the most competitive markets.
In the United States, for example, its market share was basically unchanged at 14.3 percent last year. And while it has several refreshed models on the way in coming years, so do its big rivals like G.M. and Ford.
“Toyota is back to strength, but at the same time the domestic carmakers are up to strength,” Mr. Brauer said. “It’s going to be very difficult for them to move the market-share needle anytime soon.”