Toyota’s ‘Bargains’ May Boost Sales 30%, Edmunds Says (Update4)

By Makiko Kitamura and Alan Ohnsman

March 10 (Bloomberg) — Toyota Motor Corp., buoyed by an incentive campaign, may report a 30 percent jump in U.S. sales in March after recalls of millions of vehicles damped deliveries for two months, industry researcher Edmunds.com said.

No-interest loans for as long as five years and discounted leases on most Toyota brand models from the world’s largest automaker are helping drive the rebound from year-earlier levels, Edmunds.com Chief Executive Officer Jeremy Anwyl said by phone today.

“Americans love a bargain,” Anwyl said. “Car buyers still feeling financially distressed see this as the best time to buy.”

The incentives and the “huge reservoir of goodwill” Toyota has built up over the years are limiting fallout from global recalls of more than 8 million cars, Anwyl said. Santa Monica, California-based Edmunds.com tracks pricing and consumer behavior on its car-information Web site.

Spending on incentives may add as much as 100 billion yen ($1.1 billion) in costs for Toyota City, Japan-based Toyota, Kohei Takahashi, an analyst at JPMorgan Chase & Co., said in a March 2 report. Other recall-related costs may total 315 billion yen through May 2011, and litigation settlements may cost about 100 billion yen, he said.

Sales Surge

Excluding the Lexus brand, Toyota’s U.S. sales surged 50.5 percent in the first eight days of March from a year earlier, spokeswoman Celeste Migliore in Torrance, California, said today. President Akio Toyoda, 53, said this week that the company’s sales in the nation will recover in March after falling 8.7 percent in February and 16 percent in January.

Toyota’s incentives “are showing initial evidence of improvement” in U.S. deliveries, Himanshu Patel, a JPMorgan Chase analyst in New York, said today in a note to investors. Competitors may “aggressively” match Toyota’s offerings, spurring industrywide sales, Patel wrote.

Seventy-four percent of Toyota owners said they haven’t lost confidence in the company’s vehicles, and 82 percent think they are safe, Gallup said last week, citing a poll conducted on Feb. 27 and 28.

Toyota’s American depositary receipts slid 0.4 percent, or 31 cents, to $76.36 at 4:15 p.m. in New York Stock Exchange composite trading. Toyota shares fell 1.4 percent to close at 3,445 yen in Tokyo Stock Exchange trading, and have declined 11 percent this year as the carmaker recalled vehicles worldwide to repair defects linked to reports of sudden, unintended acceleration.

The company faces as many as 105 class-action and 31 individual lawsuits claiming deaths or injuries connected to vehicles speeding out of control.

Cost-Cutting Efforts

New incentives, lower North American sales, an increase in advertising spending and scaled-back cost-cutting efforts may cut Toyota’s operating profit by 290 billion yen next fiscal year, Kurt Sanger, a Tokyo-based auto analyst at Deutsche Bank Group, said in a report on Feb. 18. The analysis anticipated the incentive program announced on March 2, Deutsche Bank spokesman Aston Bridgman said.

Toyota may post 390 billion yen in operating profit and 359 billion yen in net income in the fiscal year beginning April 1, compared with the company’s current-year forecast for a 20 billion yen operating loss and 80 billion yen in net income, according to Sanger’s report. Profit will rise as sales and margins improve in emerging markets and in Japan, he said.

The company may post net income of 469 billion yen next fiscal year, according to the median of 20 analyst estimates compiled by Bloomberg. Toyota reported a 437 billion yen net loss in the year ended March 31, 2009.

To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net

Last Updated: March 10, 2010 16:23 EST

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