Toyota Motor Corp. on Friday sharply downgraded its earnings forecast for this fiscal year through March, blaming a strong yen and the massive flooding in Thailand.
Japan’s biggest automaker expects to book a net profit of 180 billion yen ($2.3 billion), down 54 percent from the 390 billion yen it projected in August. It estimates leaner revenue of 18.2 trillion yen ($234.36 billion) from 19 trillion yen.
Toyota expects to sell 7.38 million vehicles worldwide this year instead of 7.6 million it predicted four months ago.
The maker of the Camry and Corolla sedans is on track to lose its title as the world’s largest automaker this calendar year. Toyota sank to No. 3 in vehicle sales during the first six months, trailing U.S. rival General Motors Co. and Volkswagen AG of Germany.
Toyota held off from releasing new earnings forecasts when it announced its first-half earnings results last month, citing uncertainties from the Thai floods that disrupted parts supplies.
It’s been a rough year for Japanese car makers, who were first hit with the earthquake and tsunami in March. They had largely rebounded from the disaster when they confronted the immense flooding in Thailand this autumn. Car production as far away as North America was scaled back as the creeping floodwaters put suppliers out of action.
The flooding, which was Thailand’s worst in half a century, will result in an output loss of 230,000 vehicles, said Executive Vice President Satoshi Ozawa at a news conference in Tokyo.
He told reporters the company had learned from its experience this year and that it would study ways to ensure that such unforeseen events “never again” lead to paralysis of supply chains.
But among Japan’s car makers, Honda Motor Co. has been the worst hit by the floods. It has yet to release forecasts as a result.
Compounding the pain is a strong yen, which hit multiple historic highs against the dollar this year. With jitters about European and U.S. economies, global investors have turned to the yen as a relative safe haven.
For exporters like Toyota, a strong yen reduces the value of overseas profits when repatriated and makes Japanese products less competitive on prices in markets outside Japan. Exports are a key driver of economic growth in a country that faces a rapidly aging and shrinking population at home.
Japanese manufacturers, including car and high-tech makers, responded by shifting more production abroad _ a trend that has government officials and the business community concerned about a hollowing out of Japanese industry.
“Because of the strong yen, the collapse of the foundation of Japanese manufacturing has begun,” Ozawa said.
Toyota’s new forecasts incorporate a 120 billion yen hit on operating profit from the Thai floods and another 190 billion yen from the negative impact of currency levels.
It now sees operating profit of 200 billion yen, compared with 450 billion yen in its August forecast.
The company lowered its foreign exchange assumptions to account for the yen’s appreciation over the last several months. It expects the yen to average 78 to the dollar this year, from 80 yen to the dollar in its previous estimate. It assumes 109 yen against the euro, down from 116 yen to the euro.
Toyota reports earnings based on U.S. accounting standards.
Bank of America is nixing its plans to charge a $5 debit card fee.
The bank says in a statement that the decision to scrap the plan came after listening to customer feedback in recent weeks.
The news comes after other major banks, including Chase and Wells Fargo, said last week that they were canceling tests of similar fees.
“Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so,” David Darnell, co-chief operating officer, said in a release.
The about-face by the banking industry comes amid growing public anger over fees. A movement to get customers to switch to credit unions had marked this Saturday as “Bank Transfer Day.”
As Europe’s leaders struggle toward a solution to its debt crisis, hopes are growing that cash-rich China will take a major role in a rescue _ expectations that are likely to be dashed.
On Friday, the chief executive of Europe’s bailout fund visits Beijing to talk to potential investors. Beijing has expressed sympathy for the 27-nation European Union, its biggest trading partner, but has yet to commit any cash.
Joining in a bailout could help Beijing in its campaign to join the top ranks of governments that manage the global economy _ a leadership role that many around the world have been urging China to take.
So far, Beijing has promised to help only by continuing business as usual, trading with Europe and stockpiling some of China’s multibillion-dollar trade surpluses in the safest European government bonds.
“For China, this could be a very big break in its efforts to take the seat at the head of the table in the international monetary hierarchy,” said Carl Weinberg of High Frequency Economics in a report.
Still, getting directly involved would put Chinese leaders in a position that is fraught with political risk _ spending public funds to bail out European countries that despite their debt crisis are still far richer than China per person.
Managers of China’s sovereign wealth fund, a potential investor, have tried to maintain an image as careful financial guardians after they faced criticism when early investments abroad failed to perform well.
During a visit to Paris this month, the Chinese fund’s chairman said Europeans should “respect yourself” and stop “expecting charity from China.”
European leaders are looking for investors outside the 17 nations that use the euro common currency, including sovereign wealth funds, for a fund to backstop the main bailout fund, the European Financial Stability Facility.
That is part of a complex plan under development to have the EFSF act as an insurer for bonds issued by weaker governments such as Italy and Spain, making them more attractive to investors.
The head of the EFSF, Klaus Regling, is due to explain the insurance scheme during his visit Friday to Beijing.
On Thursday, French President Nicolas Sarkozy was set to telephone his Chinese counterpart, Hu Jintao.
Even if China contributes, Beijing needs to limit its risk, said Huang Wei, an economist at the Chinese Academy of Social Sciences, a government think tank. She said that could mean the best Europe could hope for is a Chinese purchase of bonds guaranteed by the region’s stronger governments.
“I don’t think the Chinese government will invest directly in sovereign debt, such as Greek debt, because that’s very dangerous,” she said.
Still, China’s robust economy and $3.2 trillion in foreign reserves have fueled hopes in weaker economies that Beijing might emerge as a last-minute alternative to European aid and austerity measures that have fueled protests guaranteed online personal loans.
“You will hear some less-serious people in Ireland or Greece say, We don’t need you Europeans with your conditions because the Chinese will bail us out,” said Katinka Barysch, an analyst at the Centre for European Reform, a think tank in London.
But the vast scale of Europe’s needs _ as much as 1 to 2 trillion euros for the bailout fund _ makes that unrealistic, Barysch said.
“This is just not something the Chinese will give them,” she said.
China’s foreign and finance ministries did not respond Thursday to questions about whether Beijing would contribute to a bailout and the status of talks with Europe.
Asked on Wednesday about a possible Chinese role in a European bailout, foreign ministry Jiang Yu expressed hope the crisis could be resolved by the EU.
“I believe the Chinese side, with an open attitude, will discuss with the European side multiple ways of cooperation,” Jiang said.
Some Europeans are looking to Chinese companies, still financially strong after the 2008 global crisis battered Western business, as potential buyers of public assets such as power companies that might be sold to raise money.
But Chinese buyers that picked up European companies and other assets earlier at fire-sale prices have run into trouble managing them. They have shifted to pricier but more reliable blue-chip acquisitions such as China National BlueStar Corp.’s purchase this year of Norway’s Elkem, a maker of silicon and carbon parts, for a hefty $2 billion.
Chinese help also might carry a political cost, which has sparked unease for some in Europe.
Last month, Wen Jiabao repeated Beijing’s longstanding appeal to Europe to grant it market economy status _ a move that would make it harder for European companies to press trade complaints against Chinese rivals _ though he refrained from linking it directly to possible Chinese help in the debt crisis.
The top EU economic official, Olli Rehn, has distanced himself from a proposal floated by Brazil for China and other developing countries to jointly contribute.
“That would however have very far-reaching political consequences,” Rehn said in an Oct. 21 interview with Handelsblatt, a German business newspaper.
“It would mean that the Chinese, the Russians and Brazilians would indirectly have a place at the table in the eurozone,” Rehn said. “Such a decision would have strategic significance that is not to be underestimated.”
Wednesday was a good day for Fawad Khan.
He got up shortly before 3 a.m. and headed to a bank of computers in his Mississauga basement. While his family slept, he started trading.
One screen charted the euro in real time. It looked like the seismic readout for an earthquake. Trading in this kind of market, with one
The Bank of Italy has warned that the government’s revamped austerity plan must not cut back on the proposed euro45.5 billion ($65.9 billion) in new taxes and spending cuts needed to meet European Central Bank demands for a balanced budget.
Premier Silvio Berlusconi and his allies late Monday revised the planned austerity measures after widespread public anger, deciding to scrap a special tax on high earners and spare small town governments from consolidation and cuts.
The new measures tinker with retirement age and call for a reduction in the number of lawmakers, among other things fast cash loans.
The Bank of Italy’s vice chief Ignazio Visco told parliament committees Tuesday that he hoped the market’s response to the fiscal retreat “isn’t too penalizing.” He said the overall austerity plan “cannot be reduced.”
WASHINGTON
General Motors of Canada is threatening job cuts at its Oshawa complex again to soften up workers for more concessions in bargaining next year, their union charges.
The Canadian Auto Workers alleged Thursday that GM deliberately used an announcement about production of a new-generation Chevrolet Impala mid-size sedan in the U.S. this week to create a climate of job insecurity in Oshawa, where the company has assembled the model since 1999.
The union reaction followed a GM internal management memo that asked whether it would need to build any Impalas in Oshawa, given its plan to start assembling the model at its Detroit-Hamtramck plant late next year or early 2013.
CAW Local 222 distributed a stinging leaflet to thousands of workers at the Oshawa plant that criticizes GM for trying to boost its position in contract bargaining next year when the fate of the next Impala and one of two production lines will likely be a hot issue.
The arrest of IMF chief Dominique Strauss-Kahn complicates a key European meeting on whether to give Greece billions more in aid _ but experts insisted one man’s troubles won’t keep the 17 eurozone nations from trying to contain a debt crisis that threatens them all.
Eurozone financial leaders are to discuss Greece’s deteriorating economy Monday at a Brussels meeting where experts will brief them on the situation in Athens. Key questions include what conditions to put on more help to the debt-strapped nation, with European leaders unhappy at what they see as limited Greek efforts to raise money by selling government property.
Strauss-Kahn was arrested Sunday in New York on suspicion of sexual assault on a hotel maid.
Despite the arrest, the International Monetary Fund said in a statement it remains “fully functioning and operational.” The IMF Executive Board convened an informal session Sunday and made Strauss-Kahn’s deputy, John Lipsky, acting managing director while its chief was unavailable.
The Washington, D.C.-based lending body also sent Nemat Shafik, a deputy managing director who oversees IMF work in several EU countries, to Monday’s eurozone meeting to replace Strauss-Kahn.
Strauss-Kahn had to cancel his Sunday meeting with Chancellor Angela Merkel in Berlin, where the German public is deeply skeptical about putting up any more money for Greece. Germany, as Europe’s largest economy, provided a large chunk of the euro110 billion ($157 billion) bailout for Greece from the European Union and the IMF last year.
Greek government spokesman Giorgos Petalotis insisted the arrest would not affect his nation’s efforts to resolve its financial woes.
“The Greek government deals with institutions, not individuals, and continues unimpeded to implement the program that will get it out of the crisis,” Petalotis said.
German Finance Minister Wolfgang Schaeuble struck a similar tone, saying the eurozone meeting would go ahead as planned. And European politicians had already gotten used to the idea that Strauss-Kahn may leave his post soon to run for president of France next year.
Yet others said Strauss-Kahn’s immediate departure from the financial stage adds additional uncertainty to the already difficult situation in Europe.
“The leadership vacuum at the IMF comes at a highly inopportune time for Europe, which is teetering on the brink of a full-blown debt crisis,” said Eswar Prasad, a professor of international economics at Cornell University and a former IMF official us fast cash.
Many investors believe that Greece’s financial troubles are so overwhelming that a Greek default or a restructuring that would give creditors less than the full value of their bonds is inevitable. But that would be a serious blow to the euro, and eurozone governments and the European Central Bank appear determined to prevent it.
Merkel has stressed that her government will need clear conditions for any new Greek loans before it will back more help. But Schaeuble has conceded that if the experts’ full report in June shows that Greece can’t pay its debts, something more will have to be done.
The IMF put up euro30 billion ($43 billion) of that Greek loan and also supplies expertise in assessing whether Greece and other countries that get emergency loans are living up to the conditions attached to them.
A euro78 billion ($111 billion) bailout for Portugal was also on the agenda for Monday’s meeting in Brussels, as is Ireland’s progress in dealing with the financial morass that led to its own EU-IMF bailout. With the terms of the Portuguese bailout largely decided, EU finance ministers are expected to signal approval of that deal.
Although eurozone ministers were talking about Greece, a new bailout announcement was not planned for Monday. Instead, investors expected a general statement of support, followed by days or weeks of more haggling.
Marco Valli, chief eurozone economist at UniCredit, said Greece’s troubles were separate from those of Strauss-Kahn, and he expected a decision on more help for Greece in the near future.
“There is no way that just because the IMF’s chief gets into personal trouble that Greece would be left alone,” Valli said. “Maybe it can have some impact on timing, but our view is that this is not going to have a meaningful impact on the bottom line, which is that Greece would get a second bailout package.”
Other analysts agreed that the IMF will simply navigate through the upcoming difficulties.
“The IMF is not a one-trick pony,” David Buik at BGC Partners in London. “European markets may be damaged by this news for a few hours but there is plenty of depth to the IMF.”
Singaporeans will vote in record numbers today as they face a choice between Prime Minister Lee Hsien Loong’s People’s Action Party and the biggest number of opponents since independence.
A record 2.21 million eligible voters will have the chance to cast their ballot as Lee seeks a new mandate from citizens, who have voiced discontent about the rising cost of living and competition with foreigners for jobs and housing.
“No doubt over the years the PAP has done well for Singapore, but we need a check in parliament,” said Darren Lim, who’s in his 30s and works in health care. Lim, who votes in the Aljunied constituency where the opposition is fielding its top candidates, said he expects the ruling party to retain power and plans to vote for the rival Workers’ Party.
The PAP, whose five-decade rule oversaw a 41-fold jump in gross domestic product, has encountered a more vocal electorate than before, prompting a rare apology from Lee for failing to build enough public housing and expand transport links as the population grew. Lee’s efforts to boost the economy include the opening of two casino resorts, bringing the Formula One race to the island and attracting foreign workers.
The opposition drew thousands to rallies, where candidates including the Workers’ Party’s Low Thia Khiang and Sylvia Lim drew cheers with calls for a stronger voice in parliament and more affordable public housing.
‘High and Mighty’
Opposition groups including the Singapore Democratic Party are vying for 82 of 87 parliamentary seats in 26 out of 27 districts. The only uncontested constituency is that of Minister Mentor Lee Kuan Yew, 87, the Cambridge University-trained lawyer who led the island from British rule and became its first premier. He’s also the father of the current prime minister.
The parliament dissolved last month had 82 PAP lawmakers, two elected opposition politicians and 10 non-elected members.
“The PAP has served us well over the many years but it’s gotten too high and mighty,” said Yeo Pei Ming, 56, a vegetable merchant and resident of Aljunied. “I think it’s about time we had more opposition voices.”
The ruling party is likely to keep a majority because it retains support from citizens who have seen their wealth rise over the decades, as the island with no natural resources was built into a Southeast Asian manufacturing and financial hub.
Singapore’s gross domestic product was about S$285 billion ($231 billion) last year, compared with S$6.9 billion in 1960, based on 2005 market prices. GDP grew 14.5 percent last year, the most in Asia.
‘Concrete Solutions’
“I agree that the PAP has its faults, but the opposition is not strong enough,” said Landon Lim, 31, who doesn’t have to vote because he lives in the elder Lee’s Tanjong Pagar district no fax payday loan. “I see the opposition always pointing out PAP’s mistakes, but I want to see concrete solutions.”
Politicians compete in single-seat wards or multiple-seat districts called Group Representation Constituencies, or GRCs. The party that gets the most number of votes in a constituency sends all its members to parliament, and the PAP has never lost a GRC. Polls close at 8 p.m. today.
Worker’s Party Chairman Lim and Secretary-General Low will contest in the Aljunied district led by Foreign Minister George Yeo. Low had the biggest victory margin among opposition candidates in the 2006 election in percentage terms, and has held a parliament seat since 1991.
Chance to Vote
In the 2006 elections, seven GRCs were unopposed, leaving about 936,000 Singaporeans without the opportunity to vote. In 2001, 10 GRCs were unopposed and 1.36 million eligible citizens didn’t get to vote. Singaporean citizens make up 3.2 million of the island’s population of 5.1 million.
Dissent is growing among Singaporeans who may feel less beholden to the ruling party that led the island out of colonial rule than past voters. The PAP won about 67 percent of the votes cast in 2006, down from 75 percent in the 2001 elections.
Singapore’s economic success has widened the income gap, with the world’s highest share of dollar-millionaire households contributing to higher property and consumer prices.
Singapore’s Gini coefficient, a gauge of income inequality, rose to 0.48 last year from 0.444 in 2000, according to the statistics department. A reading of zero means income equality, while a reading of one means complete inequality. Inflation accelerated to a two-year high of 5.5 percent in January.
Vote PAP or ‘Repent’
The government plans to spend S$6.6 billion on benefits for citizens in this year’s budget to ease the burden of inflation.
The elder Lee, Singapore’s prime minister until 1990, appealed to voters by pointing out the PAP’s track record of boosting their wealth.
“Do not risk your assets, property values, job opportunities,” he said in an editorial in the Today newspaper last week. “Vote for men and women of proven character and track records of high performance.”
Lee also warned voters that they will “repent” if they don’t elect the ruling party.
His son has used a more conciliatory tone. Prime Minister Lee, 59, apologized at a PAP rally for not moving faster to address shortfalls in housing and transportation, the Straits Times reported. “If we didn’t quite get it right, I am sorry but we will try and do better the next time,” the paper quoted him as saying May 3.
More corporate deals and hopes for a strong first-quarter earnings season led the Dow Jones industrial average to early gains Monday. The broader market was mixed.
Endo Pharmaceuticals Holdings Inc. and Level 3 Communications Inc. both announced takeovers before the market opened. Later Monday Alcoa Inc. will become the first company in the Dow average to report first-quarter earnings. Analysts are hopeful that corporate earnings will come in ahead of expectations for the ninth consecutive quarter.
Investors still have a long list of worries, including high oil prices and an aftershock that struck Japan on the one-month anniversary of the March 11 earthquake and tsunami disaster. It was the second major aftershock in less than a week to hit the country, which is the world’s third-largest economy. Officials said the aftershock did not endanger operations at the damaged Fukushima Dai-ichi nuclear complex.
The Dow Jones industrial average rose 33 points, or 0.3 percent, to 12,413.
The broader Standard & Poor’s 500 index rose 1 point, or 0.1 percent, to 1,329. The Nasdaq composite slipped 5, or 0.2 percent, to 2,775. The Russel 2000 index of smaller companies also fell, losing 2 points or 0.3 percent to 839.
Analysts expect that Alcoa’s income jumped to 27 cents per share from 10 cents a year earlier, excluding one-time charges, according to a FactSet survey. Analysts expect a string of other companies this week to follow with their own reports of stronger growth, from JPMorgan Chase & Co. to Google Inc payday lenders.
Much of the earnings growth for companies so far during the recovery has come from cutting jobs and other costs. Analysts say this quarter’s earnings season will show more revenue growth.
More than 30 percent of companies could report revenue growth of at least 10 percent, according to S&P senior index analyst Howard Silverblatt. Analysts expect Alcoa, for example, to say its first-quarter revenue jumped 26 percent to $6.16 billion from $4.89 billion. The global economic recovery has meant more demand for Alcoa’s aluminum.
Companies are also turning to deals to help them grow. Endo Pharmaceuticals agreed to buy American Medical Systems Inc. for about $2.6 billion, a premium of 34 percent. Endo rose 6.5 percent to $43.50, and American Medical jumped 32 percent to $29.50.
Level 3 Communications rose 19 percent to $1.71. The company agreed to buy Global Crossing Ltd., which jumped 69 percent to $25.03. The all-stock transaction is valued at about $1.9 billion.
Meanwhile the struggle to control NYSE Euronext Inc. escalated.
Nasdaq OMX Group Inc. and IntercontinentalExchange Inc. said their $11.3 billion bid for the parent company of the New York Stock Exchange was rejected without any talks. NYSE Euronext said it was sticking by its $10 billion deal to be acquired by Deutsche Boerse, a German exchange operator.
NYSE Euronext fell 1.8 percent to $38.02.
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