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Toyota Reels From Foreign Exchange Turbulence and Trump

Toyota Reels From Foreign Exchange Turbulence and Trump.

Gives Up Global Sales Crown To VW.

Toyota Motor Corp, buffeted by a roller-coaster of events outside its control like President Donald Trump and foreign exchange markets, reported a big fall in third quarter profit, but said things will improve a bit in the current period.

In the three months ended December 31, Toyota said operating profit fell to 486.5 billion yen ($4.3 billion) from 627.97 billion in the same period of 2015. Operating profit is now expected to fall to 1.85 trillion yen in the year ending March 31 after earlier expectations of a sharper fall to 1.7 trillion. The new forecast is 35 per cent lower than the previous year. Toyota’s profits were under pressure in the first nine months as the yen strengthened, but the currency weakened in the current period.

Investors worry that President Trump, critical of Japan’s currency and trade policy, might impose a 20 per cent import tax on countries which have a large trade surplus with the U.S., and on cars made in Mexico. A trump tweet threatened Toyota with sanctions if a new factory in Mexico exported Corollas to the U.S., but the production there was in fact to replace Canadian output.

Talks between Prime Minister Shinzo Abe and President Trump were inconclusive, deciding only to have a dialogue on trade.

Meanwhile, Toyota gave up its four-year reign as the world’s biggest carmaker to Volkswagen, after VW produced 10.31 million cars in 2016 compared with the Japanese company’s 10.21 million.

This won’t bother Toyota too much, if Wall Street Journal Heard on the Street columnist Stephen Wilmot is right.

“Volkswagen’s historic hunger for volumes led it to sacrifice the margins of its namesake brand, which were just 1.6 per cent outside of China for the first nine months of 2016. Chasing unit sales may have also created the corporate atmosphere that led to the 2015 emissions scandal, which is likely to cost the company more than $20 billion,” Wilmot said.

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