Toyota Woes Mount, Even as It Produces Big Profits

Toyota (TM) announced a profit for its last fiscal year, even in the face of massive recalls. Net revenues for the fiscal year ended March 31, 2010, totaled 18.95 trillion yen, a decrease of 7.7% compared to the previous fiscal year, according to the company's earnings release. Net income increased from a loss of 437 billion yen to 209.4 billion yen. Consolidated vehicle sales for the fiscal year totaled 7.24 million units, which was down 330 thousand units from the previous fiscal year, the company said.

Toyota expects consolidated net revenue of 19.2 trillion yen, operating income of 280 billion yen and net income of 310 billion yen for the fiscal year that will end March 2011. It said the improvement is based on sales outside Japan.

Delayed Reactions?

The timing of the announcement was ironic, since the U.S. Transportation Department has just begun another large investigation into problems that Toyota had with recalls of 2004 models. The National Highway Traffic Safety Administration "opened an investigation into whether, in 2005, Toyota Motor Corporation notified the agency of a steering relay rod safety defect within five business days of learning of the defect's existence, as is required by law," according to NHTSA.

The agency went on to say that in 2004, "Toyota conducted a recall in Japan for Hilux trucks with steering relay rods prone to fatiguing, cracking and possibly breaking, causing the vehicle to lose steering control. At that time, Toyota informed NHTSA that the safety defect was isolated to vehicles in Japan and that the company had not received similar field information within the U.S. In 2005, however, Toyota informed NHTSA that the steering relay rod defect was present in several models sold in the U.S. and conducted a recall."

The complaint adds to problems that NHTSA announced earlier this year, which arose from Toyota being late in telling federal officials about defective accelerators. The company paid a $16.4 million fine for informing the agency four months later than was legally required. Toyota knew about the accelerator problems in September 2006, but didn't report them until January of this year. The department said the probe into the Toyota recall is ongoing.

The Questions Aren't Stopping

The Japanese carmaker faces a criminal investigation into its accelerator recall. In addition to those problems, a number of private liability suits have been filed against it. The AP has put the potential damages of those suits at $3 billion.

The recalls hurt Toyota's domestic sales in February, but the number of vehicles sold in March and April jumped. The company reported April sales of 157,439 vehicles, up 24.4% over April last year. Analysts said the improvement was due to incentives that Toyota offered U.S. car buyers, and that the company's reputation -- built over three decades -- may have helped as well. A number of other car companies also offered incentives to boost sales for last month.

The new NHTSA probe keeps the adding to the question about Toyota and whether it will face more civil and legal charges from the government and more liability suits from customers. If it does and it loses those suits, such losses don't show up in Toyota's financial forecast.