updated 11/7/2006 7:47:56 AM ET 2006-11-07T12:47:56

Toyota said Tuesday its net profit surged 34 percent in the July-September quarter, boosted by strong sales in the North American and European markets at a time its U.S. rivals are struggling.

The Japanese automaker, on pace to overtake General Motors Corp. as the world’s biggest automaker in coming years, also raised its profit forecast for the full fiscal year through March to $13.14 billion (1.55 trillion yen), up from an earlier 1.31 trillion yen.

For the fiscal second quarter, Toyota Motor Corp. posted $3.44 billion (405.7 billion yen) in group net profit, up 33.5 percent from the 303.7 billion yen reported for the same period last year.

Overall sales in the fiscal second quarter rose 17.3 percent to $49.4 billion (5.83 trillion yen). Sales were up in North America, due to the strong sales of redesigned models such as the RAV4 and Yaris, and the new model FJ Cruiser.

“It looks like Toyota’s efforts to overtake GM are going according to plan,” said Shiichiro Kobayashi, Mitsubishi UFJ Research and Consulting. “Basically, Toyota is eating the pie of the Big Three in the United States.”

Both GM and Ford Motor Co. reported losses in the most recent quarter, and in July Toyota for the first time beat Ford in U.S. vehicle market share.

Toyota’s stellar results came despite a string of potentially damaging recalls because of defective parts, and investigations of the company in the United States and Japan. Toyota officials reiterated their pledge Tuesday to preserve the company’s reputation for excellence while keeping down costs.

“Our business is expanding,” said Takeshi Suzuki, Toyota senior managing director. “The biggest task is how to maintain quality and create cars that are competitive in terms of prices.”

Consolidated vehicle sales for the quarter hit 2.1 million units, up 9 percent. For the half-year, vehicle sales were a record 4.2 million, the company said.

Toyota upped its forecast of sales for the year to 8.5 million units. Compact models such as Aygo and Yaris helped boost sales in Europe. Sales in Japan edged down.

The results were in step with general good times for Japanese automakers. Nissan Motor Co.’s quarterly profit rose 31 percent. Honda Motor Co. said last month that second-quarter profit slipped, but it was still well into the black.

By contrast, GM posted a $115 million loss for the third quarter last week, saying its results reflected benefits of its turnaround plan. The company also continued to lose market share in the quarter. Globally, its share was 13.9 percent, down from 14.4 percent during the same period last year.

Toyota, meanwhile, is planning to increase overseas production by 40 percent of its 2005 level to 5 million vehicles by 2008, a Japanese media report said recently.

Toyota also announced on Tuesday that it is buying a 5.9 percent stake in Japanese truckmaker Isuzu as part of a new deal for the manufacturers to collaborate in engine technology.

Toyota and Isuzu Motors Ltd. plan to work together in researching and developing small diesel engines, including cooperating on emission-control technologies as well as alternative fuel technologies, the companies said in a statement.

For the six months through September, Toyota’s net profit rose to $6.59 billion (777.2 billion yen) from 570.5 billion yen a year ago. Net sales in the period increased 15.3 percent to $97.2 billion (11.47 trillion yen).

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