Toyota losses mounting, US parts firms seek aid

Toyota, the world's top auto maker, said its losses were ballooning as global car sales slide, and US auto parts suppliers pushed for government aid to save their companies and hundreds of thousands of jobs.

A sudden collapse in consumer demand last year and turmoil in credit markets have battered automakers, forcing them to cut production and shed jobs, adding to the global economic gloom.

Related industries are also reeling.

The US auto supply industry, which employees more people directly than auto manufacturers, said it was in talks with the US Treasury to secure emergency funding to avoid a wave of bankruptcies.

Toyota Motor Corp. warned that its operating loss for the year to end-March would be €3.8 billion, three times the loss it had forecast just six weeks ago.

Toyota's sales fell 34 per cent last month in the United States, its biggest market, and 23 per cent in Japan, as recession gripped major economies.

"This is absolutely awful. The earnings situation has obviously deteriorated since last October when the company's stock price plunged," said Yoshinori Nagano, chief strategist at Daiwa Asset Management in Tokyo.

"Hopes for US economic (stimulus) steps have supported the company's stock since then. Still, if something goes wrong on that front, that could batter the stock price once again." Toyota posted an operating loss of €3 billion for October-December. The Japanese firm has already let most temporary workers go, and could cut full-time jobs in Britain and North America, a company source said.

Predicting further pain for the world auto industry, Moody's Investors cut its credit rating on Toyota for the first time in a decade.

In Europe, world-number two truck maker Volvo said it slipped to a surprise operating loss in the fourth quarter amid plunging demand and warned that key markets were likely to fall further this year.

Toyota's grim forecast came as US parts suppliers pressed for government aid, and as President Barack Obama urged swift passage of a $900 billion stimulus package for the world's largest economy.

The auto suppliers have requested some €20 billion in assistance, an amount that would double the US government's commitment to the auto sector at a time when sales are at their lowest since the early 1980s.

"The key now is whether consumers in America will be able to start securing loans again," Daiwa's Nagano said.

"Slumping sales due to the dismal state of the economy may be inevitable, but another big problem today is that consumers who can normally get loans can't get them."

Bob McKenna, president of the Motor & Equipment Manufacturers Association warned that the parts industry has been shut off from credit at a time when orders from automakers are shrinking. Major problems at auto suppliers could quickly cripple or shut down car and truck production.

"Without immediate credit availability, an onslaught of supplier company bankruptcies is inevitable in the coming weeks and months, which would have a devastating, long-term effect on the US economy," Mr McKenna said in a statement.

Delphi Corp., the biggest parts supplier to General Motors Corp., said it was seeking court permission to eliminate healthcare benefits for 15,000 salaried retirees. Delphi has been under bankruptcy protection since 2005.

GM itself is restructuring under a €10 billion government bailout, and along with Chrsyler LLC is racing to meet a February 17 deadline to show US officials they can be made viable after receiving massive public aid.

In South Korea, cash-strapped SUV maker Ssangyong Motor Co. secured protection from creditors, but may struggle to revive in the near term or find new owners after it posted four loss-making quarters on plunging sales.

Ssangyong, which employs 7,100, is South Korea's first big corporate casualty as the global recession batters Asia's key export markets.

Difficulties with parts suppliers prompted Russian carmaker AvtoVAZ, which is 25 per cent-owned by Renault, to halt its assembly line indefinitely, the Kommersant newspaper said, quoting AvtoVAZ's president.

Factbox: Auto industry production cuts

AvtoVAZ - The Russian carmaker, which was selling 50,000-60,000 cars per month before the crisis, plans to produce 32,000 vehicles this month.

BMW - Suspended production at its factory in Leipzig for one week in October.

Chrysler - Since 2007, has cut 1.2 million units of capacity, eliminated 12 production shifts and closed two plants.

Fiat - Will close factories for up to two weeks at a time between January and February.

Ford - To cut its 2009 first quarter production plans by 38 percent from a year ago.

General Motors - Has cut its 2009 first quarter production plans by 53 per cent from the same period in 2008.

Honda - Japan's No.2 automaker added further production cuts of 50,000 vehicles for the year to end-March to the 370,000 that it planned in North America, Europe and Japan.

Hyundai - South Korea's No.5 auto maker plans to cut production at its domestic plants by 25-30 percent in the first quarter.

Jaguar Land Rover - Owned by Tata of India, it has cut production at its Solihull, Halewood and Castle Bromwich plants in Britain.

KIA - South Korea's no. 2 carmaker has said it would cut output by a quarter in January-March 2009.

Mazda - Japan's no. 5 automaker said it would cut production by a further 48,000 units this year, bringing the net reduction to 18 percent from initial plans.

Mitsubishi Motors - Plans to build 330,000 fewer vehicles this year than initially planned, roughly equivalent to a third of its sales volume forecast.

Nissan - Japan's No.3 automaker said production cuts amounted to 225,000 units for this year.

Porsche - German sports car maker will halt production for another 19 days before its summer break in addition to 11 already taken.

Peugeot Citroen - Said it would cut production by 30 per cent in the fourth quarter and would close some sites for a few days to a few weeks.

Seat - Will further cut production at its main plant in Catalonia in the first half of this year.

Skoda - Moving to four-day work from start of this year.

Toyota - Suspending operations at 12 vehicle and parts plants in Japan for six days this month and five next month. Has cut production forecast for 12 months to March 31 to 7.08 million from 8.87 million vehicles, down by a fifth.

Volvo - Says has cut inventories by slamming on the brakes at its plants across the group.