Even Toyota Is Feeling The Sting Of The Drop In U.S. Auto Sales

Implications: Toyota finds itself buffeted by a triple whammy of outside forces: An unraveling U.S. market, surging raw material costs and a Japanese yen that continues to rise in value against the dollar. 

Analysis: Toyota racked up record results for the just-ended fiscal year.

But the good news ends there. Now the world's biggest, most profitable car company is warning that profits for the current year are poised to fall for the first time in nearly a decade.

What's more, Toyota has backed off its optimistic outlook for a 2008 sales increase in North America. It is more likely that volume will decline.

It's a dramatic reversal from the year ended March 31, 2008. Sales, operating profit and net-income hit all-time highs in that period.

But now Toyota finds itself buffeted by a triple whammy of outside forces: An unraveling U.S. market, surging raw material costs and a Japanese yen that continues to rise in value to the dollar.

Toyota is hardly alone. The same headwinds are lashing its domestic rivals as well. And this earnings season has been marred by gloomy outlooks.

Mitsubishi Motors Corp., Honda Motor Co. and Mazda Motor Corp. have all forecasted double-digit percentage decreases in operating profit and net income for the current year.

Nissan Motor Co. releases its financial results May 13.

The forces fueling the downturn are largely beyond Toyota's control:

U.S. sales volume is down 7.7 % at an adjusted annual rate of 14.7 million vehicles.

Domestic steel prices that have shot up 27.8% between November and March.

A Japanese yen that has climbed 11.1% against the dollar since October.

Toyota is struggling with record high inventory levels in the U.S., largely because it misjudged how bad the domestic market downturn would be.

The company had predicted domestic sales in the high 15 millions, but is now working in the low 15 millions, and that may be too high with some analysts predicting U.S. sales in the high 14 millions.

Yet on an annual basis, it was  a banner year for the automaker.

Revenues rose 9%. Operating profit rose 1.4%. And net income advanced 4.5%.

All these results were company records.