Flat sales tarnish Toyota's success streak

Published May 10, 2007

TOKYO - Just a few weeks after trumpeting that it would surpass GM as the world's largest automaker this year, Toyota is signaling that it, too, is suffering from some of the troubles ailing its U.S. rivals.

Toyota officials said Wednesday that auto sales will likely be flat this year in the key North American market, where higher gas prices, a housing slump and a slowing economy have tempered consumer spending.

To be sure, Toyota Motor Corp. is still outpacing rivals and still expects higher sales and profits. And some of the tempering of its profit growth is due to spending on quality controls, after suffering a surge in recalls that analysts say may be a byproduct of its recent aggressive growth efforts.

The Japanese automaker will also be investing in new plants to boost production, and research for new models - all factors pushing down profit growth, it said.

Toyota, which beat General Motors Corp. in worldwide vehicle production and sales in the first quarter for the first time ever, reported Wednesday a quarterly group profit of 440.1 billion yen ($3.67-billion), up 9 percent from $3.37-billion the same period the previous year.

But Toyota forecast a profit increase of 0.4 percent for the fiscal year through March 2008, which would be the smallest improvement for the company since seeing its profits slip in the fiscal year ending March 2002.

Analysts say Toyota's slowing growth isn't likely to stop it from overtaking GM to become the world's No. 1 automaker - a title that technically hinges on worldwide vehicle production for an entire year.

Toyota's sales in the fiscal fourth quarter rose 10 percent.