Toyota Promises Higher Profits And Flat Sales

Here we go. Are you sitting down?

Presenting its Q3 financials in Tokyo today, Toyota delivered much higher profits and much higher sales while promising even higher profits at pretty much flat sales for the future. With a man on his left who looked like an accountant, and who had a big accountant’s briefcase on his knee, ready to pull whatever document his master needs, and a very quiet Shigeru Hayakawa on his right, Toyota Senior Managing Officer Takahiko Ijichi did forecast a net profit of 860 billion yen ($9.3 billion) for the fiscal year ending on March 31, 2013 up from the previously forecasted 780 billion yen. He also signaled a pause in Toyota’s rapid expansion:

“We were supposed to have learned a lesson from the Lehmann shock, but maybe, these lessons have not been fully taken into consideration. Volume increase is not tantamount to growth of the company.”

Takahiko Ijichi: Remember carmageddon

Basically, Ijichi announced that Toyota will not build any new factories within the next three years. Toyota will be on the hunt for “muda”, or waste, and will maximize the production capacity of existing plants. Toyota does not want to make the before-Lehmann mistake again, where rapid build-up in volume went hand-in-hand with a rapid build-up of plants and fixed costs. Projects that are planned will be finished, but there won’t be new plans.

The profit for the quarter would have been one billion dollar higher, would there not have been the “decrease as a result of “recording costs related to the settlement of the economic loss litigation in the United States.” A billion dollars, thrown to the lawyerly wolves, was stuck into “other.” The impact barely registered on the P&L.

Ijichi and his trusted side-kick

Reporters wanted to know how China affects Toyota’s bottom line. Ijichi remained vague. Due to different fiscal calendars, the reporting quarter from October to December 2012 reflects July through September in China, which were largely unaffected by the recent China Japan relations,” as Ijichi put it. He figures, the China affair may cost Toyota “200,000 units or less” in the second half of the current fiscal.

“Volume increase is not tantamount to growth.”

Toyota appears to be quite sanguine about the China matter. The company has its eyes and focus set on Southeast Asia, a market of more than 9 million units which grew 14 percent last year. Toyota sold 1.5 million cars in this region last year, and it wants to sell more. In China, Toyota wants to sell 900,000 units this year.

Speaking of sales, Toyota again confounded the reporters that were assembled in its basement meeting room. Those who cite the press release are either completely confused, or they don’t notice the confusion. Today, Toyota announced that from April 2012 to March 2013, it intends to sell 8.85 million units worldwide.

The fourth estate, JDM spec

A week ago, Toyotas said it sold 9.75 million for calendar 2012. Some reporters, who noticed the difference, wrote the 8.85 million are without Daihatsu and Hino. A Toyota spokesman told TTAC later that Daihatsu and Hino are included in the 8.85 million, China is not. Toyota sold 840,000 units in China last year. Close enough. For this year,Toyota wants to add maybe two percent to its sales and plans for flat production numbers.

My drop in the “goiken bako” the suggestion box of the Toyota Way: Avoid quarterly muri and muda by mentioning the Chinese units somewhere, so that the numbers reconcile. A separate handout would suffice.