Toyota, Facing First Loss in 59 Years, Seeks Aid From Japan

Toyota, Facing First Loss in 59 Years, Seeks Aid From Japan

March 3 (Bloomberg) -- Toyota Motor Corp., forecasting the first loss in 59 years, is seeking loans from the Japanese government as private investors demand up to 50 percent more in interest for the company’s debt.

The company’s financial unit may ask for 200 billion yen ($2 billion) in loans, public broadcaster NHK reported today, without saying where it got the information. Toyota Financial Services Corp. is in talks with state-owned Japan Bank for International Cooperation, said Toyota Financial spokesman Toshiaki Kawai without confirming the timing or amount.

The carmaker expects a net loss of 350 billion yen after vehicle sales in the U.S., traditionally Toyota’s most profitable market, plunged 31 percent last quarter. The global recession has also forced General Motors Corp. and Chrysler LLC to get bailouts from the U.S. government.

“Toyota should take advantage of anything it can to get through this crisis,” said Hitoshi Yamamoto, chief executive officer of Tokyo-based Fortis Asset Management Japan Co., which manages $5.5 billion in Japanese equities. “Money is not flowing in the capital markets.”

Automakers usually raise funds through bonds and loans for their financial companies to offer loans for their customers. The government aid would mostly be used to help offer loans to customers in North America, Toyota Fiancial’s Kawai said.

Toyota sold 80 billion yen in 10-year bonds priced to yield 2.012 percent last month. That compares with 150 billion yen of 10-year bonds sold in August 2002, priced to yield 1.337 percent.

Government Aid

Japan will use some of its foreign-exchange reserves to lend to the state-owned corporation that gives financing to Japanese companies operating abroad, Japanese Finance Minister Kaoru Yosano said today.

Toyota follows other carmakers seeking government help as sales plunge worldwide. GM has received $13.4 billion in U.S. aid and is seeking more to keep its operations in its home market running through this month. France granted PSA Peugeot Citroen and Renault SA a total of 6 billion euros in five-year loans last month. In the U.K., carmakers are seeking support for their finance units from the Bank of England. Mitsubishi Motors Corp. has gotten subsidies from Japan’s Ministry of Health, Labor and Welfare to help pay wages, as it cuts domestic production.

Slashing Production

Toyota, the maker of the Corolla compact, may slash production 12 percent next fiscal year, it said yesterday. Worldwide vehicles sales may fall 14 percent to 55 million units in 2009, according to Nissan Chief Executive Carlos Ghosn.

The Toyota City, Japan-based company has 2.34 trillion yen in loans and bonds maturing this year, according to data compiled by Bloomberg. The company had 2.3 trillion yen in cash reserves as of Dec. 31.

The extra yield over government debt of similar maturity that investors demand to own Toyota’s 1.22 percent bond due 2011 has more than doubled to 56.75 basis points as of yesterday from September according to data compiled by Bloomberg.

Toyota’s sales in Japan plunged 32 percent last month. In the U.S., sales also dropped 32 percent in January.

Toyota fell 0.3 percent to 3,060 yen, as of 1:44 p.m. in Tokyo. The shares have risen 5.3 percent this year compared with a 19 percent drop in the benchmark Nikkei 225 Stock Average.

In response, automakers are shutting factories and cutting jobs. Toyota plans to halve the number of contract workers in Japan to 3,000 by March 31. GM last month said it is cutting another 47,000 jobs globally, as it reported a $30.9 billion annual loss. Volkswagen AG, Europe’s largest carmaker, on Feb. 28 said it will cut all 16,500 temporary jobs globally and shuttered five factories in Germany last week.

BLOOMBERG