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Toyota will post 1st loss in 70 years

The automaker blamed big drop in U.S. demand.

NAGOYA, Japan - Toyota Motor Corp. said yesterday that it would report for this fiscal year its first operating loss in 70 years, an acknowledgment that after a decade of rapid growth it could no longer escape the slowdown plaguing the global auto industry.

The Japanese auto company also lowered its global vehicle-sales forecast for the second time this year and said it was putting ambitious expansion plans on hold, in large part because of a precipitous drop in demand in the key U.S. market.

"The tough times are hitting us far faster, wider and deeper than expected," Toyota president Katsuaki Watanabe said during a news conference at the company's headquarters here. "This is an unprecedented crisis requiring urgent action."

Toyota had reported strong growth in recent years, boosted by heavy demand for its fuel-efficient models such as the Camry sedan and the Prius gas-electric hybrid.

But Watanabe said a severe drop in demand - especially in the United States, which accounts for one-third of its vehicle sales - and profit erosion from a surging yen were too much for Japan's No. 1 automaker. Overall, U.S. auto sales fell in November to their lowest in 26 years.

Toyota said it expected an operating loss of $1.66 billion for the fiscal year ending in March, compared with an operating profit of $25.2 billion a year earlier.

Toyota said it still would post a small net profit of $555 million, thanks to outside dividend income, down from year-earlier net earnings of $18.89 billion. But operating income is seen as the best reflection of its core business.

The outlook was a dramatic change of fortune for the iconic company, which in recent years had outlined ambitious expansion plans and had weathered an industry slowdown much better than its U.S. rivals.

In its forecast, Toyota lowered the number of vehicles it expects to sell globally this calendar year to 8.96 million, 4 percent below last year. Earlier this year, Toyota had projected worldwide sales of 9.5 million vehicles.

U.S. auto sales are not expected to start recovering until late 2009, said Tsuyoshi Mochimaru, an auto analyst for Barclays Capital in Tokyo.

Toyota said there were no plans to lay off any full-time employees, though it plans to cut the number of temporary workers at its Japanese plants in half to about 3,000.

Toyota is a relatively old-style Japanese company that offers lifetime employment, and only in recent years has hired and let go of temporary workers to adjust production. It said it was reviewing overseas jobs but had not reached a decision.

Watanabe vowed Toyota would grow so lean it would realize profitability even if its worldwide sales fall as low as 7 million vehicles - what he called the basic "bottom line" for Toyota.

"We must change to become more slim, muscular and flexible," he said.

The automaker will focus on hybrids and small cars, and invest in ecological technology to prepare for long-term growth, officials said.

While Japan's automakers are in far better financial shape than their cash-strapped American counterparts, the global slowdown is hitting them hard. Last week, Honda Motor Co. also lowered profit and sales forecasts and declined to give a vehicle sales goal for 2009.