JAPAN TOYOTA EARNS
Katsumi Kasahara  /  AP
A visitor looks at vehicles displayed at a Toyota showroom in Tokyo Friday. Toyota Motor Corp. chalked up a 39 percent jump in profit for the first fiscal quarter as soaring gas prices had drivers around the world snatching up the Japanese automaker's models.
updated 8/4/2006 1:55:52 PM ET 2006-08-04T17:55:52

Toyota appeared to be on track to overtake General Motors as the world's No. 1 automaker as it boosted vehicles sales around the world and reported a 39 percent jump in profit in the first fiscal quarter Friday.

The Japanese automaker's reputation for delivering fuel efficiency was proving a boon at a time when drivers are balking at soaring gas prices — at about $3 per gallon at U.S. stations — analysts said.

Toyota Motor Corp., the world's second biggest automaker, is among a clutch of Japanese vehicle companies reporting robust results lately in contrast to the plight of the U.S. automakers.

"Everything is going well for Toyota, especially in North American sales," said Koji Endo, auto analyst at Credit Suisse First Boston Securities in Tokyo.

Endo said that in addition to robust sales of Toyota's smaller models such as the Corolla, the company's light trucks and Lexus luxury models — which tend to produce healthier profit margins per vehicle — have also been doing well, boosted by the perception that they're more fuel efficient than rival offerings.

Toyota's profit in April-June totaled $3.2 billion, as a weaker yen also helped earnings, adding $871 million to operating profit.

Quarterly sales surged 13 percent to $49 billion, according to the manufacturer, based in Toyota city in central Japan.

Some analysts believe Toyota will overtake GM as the world's No. 1 automaker in a few years if the current pace continues.

In July, Toyota for the first time beat Ford Motor Co. in U.S. vehicle market share, outselling Ford to be No. 2 after GM, although Ford's year-to-date sales are still ahead of Toyota's.

To keep its ambitions for growth going, Toyota is increasing production in various regions, including a plant in Texas that begins production this year, as well as in China, where Toyota recently rolled out its first Camry. Production expansions are also in the works in Canada, Thailand, Mexico and Russia.

Toyota sold 2.09 million vehicles around the world in the latest quarter, up from 1.95 million the same period a year earlier. The automaker boosted sales especially in North America, where it sold 747,300 vehicles, up more than 16 percent from 641,200 the first quarter of last year.

General Motors continues to outsell Toyota, selling 2.4 million vehicles globally in the latest quarter.

Toyota kept unchanged its forecast for the full fiscal year ending March 2007, at $11.4 billionprofit on $194 billion in sales. It also maintained its vehicle sales forecast for fiscal 2006 at 8.45 million vehicles, up from 7.97 million Toyotas sold in the fiscal year ended March 31.

In quarterly revenue, Toyota reported a 14 percent increase in Japan, 19 percent rise in North America and 24 percent surge in Europe, while revenue inched down 4 percent in Asia but leaped 25 percent for other regions during the three months.

Toyota is likely to continue to get a big lift from the growing global interest in fuel-efficiency. Toyota has recently begun selling in the U.S. a hybrid version of the Camry sedan. The Camry has been the best-selling car in America for eight of the last nine years.

Japanese rival Honda Motor Co., which reported a 29.6 percent increase in profit to $1.2 billion for the quarter through June, has also been boosting U.S. market share. Honda makes the Civic and Accord, both reputed as being fuel efficient.

In contrast, U.S. automakers have been struggling.

GM, which is shuttering plants and sending thousands of workers to early retirement, lost $3.4 billion in the latest quarter, while Ford lost $254 million.

Tsuyoshi Mochimaru, auto analyst at Deutsche Securities, said Toyota's earnings for the latest quarter got an extra lift from a deflated profit from a year earlier caused by investment costs that had dragged down results then.

Even then, Toyota's performance is stellar, he said.

"Toyota's results were excellent," said Mochimaru. "Sales growth in the American market worked as a big plus for Toyota."

But Toyota has faced its own troubles, including increasing numbers of recalls partially due to its efforts to cut costs by using the same parts across different models.

Japanese authorities have launched a criminal investigation into three Toyota officials suspected of failing to do anything about a faulty steering part, which may have caused a 2004 head-on accident that injured five people.

Toyota is also facing a sexual harassment lawsuit in the U.S. filed against Hidetaka Otaka, who has since stepped down as the president and chief executive of Toyota's U.S. unit. Otaka says he is innocent.

Toyota appointed Jim Press, an American who headed Toyota's U.S. sales unit, as president of Toyota Motor North America Inc., overseeing sales and engineering divisions as well as 12 manufacturing plants in the U.S. and Canada _ the first non-Japanese to take that position.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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