Strong Yen Drives Toyota Net Income Down 25% : Autos: Analysts say the $1.7-billion profit by Japan’s leading car maker is still relatively good given state of the industry.

Marking its third straight year of profit declines, Toyota Motor Corp. said Wednesday its net income for the year ended June 30 fell more than 25%.

Still, some analysts said Toyota’s $1.7-billion profit on sales of $97.2 billion was relatively good given the serious decline in the fortunes of Japan’s auto industry because of recession at home and abroad and, most recently, the steep rise in the value of the yen.

“They’ve gone down a lot, but so has everybody else,” said Ben Moyer, an auto analyst at Merrill Lynch.

On Tuesday, Honda Motor Corp. said its earnings for the April-June first quarter dropped 62%, and it projected a 40% profit decline for the full year ending March 31. Earlier this year, both Nissan Motor Corp. and Daihatsu Motor Corp. announced losses.

In addition to declining auto sales in Japan and overseas, in part because of the improving quality of U.S.-made vehicles, the strong yen has taken a huge bite out of the earnings of the nation’s 11 auto makers.

Toyota officials said they have not yet raised their overseas dollar prices to fully recover the decline in the amount in yen of overseas profits brought back home.

Toyota officials calculated that the company lost $1.1 billion in the last business year because of the yen’s surge.

If the yen keeps rising, analysts say, all of Japan’s auto firms could be pushed into the red, forcing massive restructuring, such as unprecedented layoffs and mergers.

Ryuji Araki, a Toyota director who for five years headed the firm’s Kentucky manufacturing plant, agreed. “If the exchange rate goes to 100 yen to the dollar, the hollowing out of Japan’s industry will begin and we will have to start adjusting employment,” he said.

Toyota, Japan’s largest auto maker, has begun an aggressive cost-cutting program, including reassigning engineers to develop strategies for slashing expenses and cutting directors’ pay 10% this year after a 20% cut last year. A key factor in Toyota’s favor is its rising overseas production, which will help mitigate the impact of currency exchange rate fluctuations.

In the last fiscal year, Toyota produced 831,780 cars overseas, a 20% gain from the previous year. The company said it expects to boost foreign production another 12% in the current fiscal year. Even so, Toyota said it expects its net income to decline 32% in the current fiscal year ending next June 30.

The Nihon Keizai newspaper predicted that Toyota could even suffer a loss in operating profits this year, depending on fluctuations in the exchange rate.

Araki said Toyota laid out a business plan for the current fiscal year on an assumption that the exchange rate will average 110 yen to the dollar. But with the rate actually hovering around 105 to the dollar, the prediction could prove optimistic.