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Toyota Expects Profit Record, But Prius Recall Clouds Outlook

1.9 Million Prius Hybrids Recalled, More Than Half Of Total Made.

Just when investors in Toyota thought the worst news was behind them, news broke about the massive Prius recall.

Investors had hung on through the 2011 tsunami-earthquake and the unintended acceleration bad times. Things had started to turn around thanks in no small way to the huge yen depreciation, with record profits expected for the current financial year ending March 31.

But Toyota announced on Feb 12 that about 1.9 million Prius hybrids  – more than half of those ever sold – would be recalled to fix a software glitch which under certain circumstances could bring the car to a halt.

It wasn’t immediately clear if this meant Toyota’s recent forecast of a record operating profit of $18.5 billion would have to be cut. That forecast was an 81.7 per cent gain on the previous year.

After Toyota’s profit forecast, Moody’s Investors Service said it believed the company would achieve it “backed by the yen staying weak against major currencies such as the U.S. dollar and Euro; healthy demand in Japan, U.S. and Asian markets, and continued cost reductions.

The Financial Times Lex column said the benefit Toyota gained from yen depreciation was the difference between losing $137 per car in the U.S., to gaining $632.

“Put another way, it would have to sell 1.2 million more Land Cruisers in the U.S., assuming its current net margin, to match that,” Lex said.

Toyota was the world’s number one seller of cars in 2013, and has set a target of 10.32 million in 2014.

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