Toyota profits dragged down by incentives

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TOKYO — The high cost of incentives in North America dampened Toyota Motor Corp.’s mostly rosy global profit report last week, although the automaker said it has now eased off the spending throttle.

North American net profit plunged 29 percent for the quarter ended June 30, a decline of ¥10.4 billion ($94 million) from a year earlier, said Masayoshi Shirayanagi, Toyota Motor Corp. senior managing officer.

Speaking through a translator, Shirayanagi said the North American decline was largely due to sales incentives.

The American setback was more of a drag than a crisis for the parent company. Worldwide, Toyota posted a 19 percent jump in quarterly profit, its best quarterly performance in two and a half years.

Toyota operating profit was ¥682.6 billion ($6.11 billion) for April-June, vs. ¥574.3 billion ($5.18 billion) a year earlier.

Around the world, Toyota is on a campaign to rein in costs everywhere it can. Shirayanagi said the automaker reduced its costs by ¥15 billion ($135 million) during the fiscal quarter, which offset the increased costs in materials that it experienced.

U.S. incentives have complicated Toyota’s profit plans.

Outsiders who monitor vehicle values and the cost of retailing have noted that Toyota and Lexus spending has been high in recent months. The April-June quarter saw Toyota pressing to move higher volumes of its recently redesigned Camry sedan in a market that has gone soft on sedans, while Lexus also has used higher incentives than it traditionally requires.

But market monitor Motor Intelligence noted that the incentive spend on the average Toyota-brand vehicle fell 10 percent in July to $2,214 — still high compared to $1,632 for the average Honda-brand vehicle.

In a May interview in Automotive News, Toyota Motor North America CEO Jim Lentz said rising incentives have been a concern for the company.

“You’re always concerned about profitability because nobody wants to give up share, no one wants to reduce production,” Lentz said. “And as a result, you’ll have some players that overproduce, start parking them at the fence, and then have to come up with huge incentives to move that.”

Toyota officials said last week that the automaker projects that its full-year profit will slip 4.2 percent to ¥2.3 trillion.

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