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Toyota Earnings of $10 Billion Solidify Hold on 2nd Place

Toyota Motor on Tuesday became the first Japanese company to report a net profit of more than a trillion yen, or about $10 billion, firmly establishing its position as the world’s No. 2 automaker ahead of Ford Motor.

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From USA TODAY

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DETROIT — Toyota Motor on Tuesday became the first Japanese company to report a net profit of more than a trillion yen, or about $10 billion, firmly establishing its position as the world’s No. 2 automaker ahead of Ford Motor.

Toyota’s earnings dwarf those of global competitors General Motors and Ford, and fuel expectations that Toyota could pass GM in market share within a decade. Toyota’s market capitalization is already larger than GM’s, Ford’s and DaimlerChrysler’s combined.

Toyota posted $10.2 billion in net earnings for the year ended March 31, a 55 percent gain from the previous year, on revenue of $152 billion. It was helped by rising sales and profits in every region of the world, cost cutting and a one-time pension fund gain. Toyota’s American depositary receipts closed up 2.5 percent at $68.37 Tuesday. That’s 52 percent above their 52-week low.

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Toyota wants to match GM’s current 15 percent share of the global auto market by 2015. Toyota sold 6.72 million vehicles last year, an 11 percent-plus share. GM sold 8.3 million.

Toyota executives say the automaker wants to sell 7.02 million vehicles worldwide this fiscal year.

Toyota narrowly passed Ford in global vehicle sales last year, although Ford’s tally of 6.70 million vehicles didn’t include any sales from Japanese automaker Mazda. Ford owns a controlling 33 percent stake in Mazda. Ford earned $495 million last year.

”Toyota is on a roll, boosting sales in America, Europe and Asia,” says Takaki Nakanishi, analyst at UBS Securities in Tokyo.

Toyota sold 1.9 million Toyota and Lexus vehicles in the USA last calendar year, up 6.3 percent from a year earlier. Meanwhile, its products and sales are expanding in both niche and mass-market segments:

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* Toyota is in the middle of a national rollout of a third brand, Scion, aimed at the youth market. Scion currently has two vehicles, with a third on the way later this year. It has sold 17,000 so far this year, with 100,000 sales expected in 2005.

* Sales of the new Toyota Sienna minivan are way above expectations, on track to sell 175,000 this year, up from 105,000 last year.

* Sales of Lexus sport-utility vehicles, a big profit driver, are up 25 percent from a year ago, while its passenger car sales are up 17 percent. Lexus is developing a $100,000-plus car to solidify its luxury cachet.

* Toyota has been a bit player in the full-size pickup market, with just 101,000 Tundras sold last year, a 4.5 percent share or about half that of GM’s GMC brand. But it will launch a new Tundra in 2006, built at a new assembly plant in San Antonio, that eventually will produce at least 250,000 vehicles a year.

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Japanese automakers have traditionally tried to keep sales incentives low, compared with Detroit. But Toyota increased its spending per vehicle to $2,841 in the first quarter, up $763 from a year ago, according to CNW Marketing Research. GM’s spending rose $466 to $4,388 in the same period.

Still, Toyota will ”be able to sell more vehicles in the United States this year, even without using as much in sales incentives as last year,” predicts Executive Vice President Ryuji Araki.

Toyota’s Japanese rivals, Nissan and Honda, also reported record net profits for the year, but with far smaller gains over a year ago: 1.7 percent for Nissan and 8.8 percent for Honda.

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U.S. automakers say Toyota’s profit, while impressive, is helped by a weak yen. Though Toyota said it lost $900 million last year on the yen’s strengthening against the dollar and the euro, the Bank of Japan spent $188 billion intervening in currency markets. The result was the dollar weakening against the yen by just 11 percent while it weakened against the euro by 20 percent.

Health care is much cheaper for Japanese companies than for U.S. companies. And the Japanese government has been taking pension obligations off companies’ books. Toyota said it gained $943 million last year from reimbursement from a government pension fund.

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Toyota says sales outside Japan might rise 6.2 percent this year to 4.7 million units. Sales in North America, the world’s biggest automotive market, might increase 3.7 percent to 2.2 million units. So far this year in the USA, Toyota brand vehicles are up 11 percent, and Lexus sales are up 21 percent. Industrywide, U.S. sales are running about 4 percent behind last year.

Copyright 2004 USA TODAY, a division of Gannett Co. Inc.

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