Toyota Says It Plans to Hike Capital Spending

Toyota Motor Corp., the world’s second-biggest carmaker, said it would increase spending by 15% on new factories and vehicle development as it sought to win more market share from General Motors Corp. and Ford Motor Co.

Toyota plans to raise capital spending to a record 1.25 trillion yen ($11.8 billion) this year, even after its net income fell 17% to 291 billion yen ($2.8 billion) in the fourth quarter ended March 31, the company said Tuesday. Sales rose 4% to 4.88 trillion yen ($46 billion).

President Fujio Cho’s investments helped Toyota withstand increased steel and plastics costs better than GM, the world’s biggest automaker, with sales of Prius gas-electric vehicles and Scion cars soaring this year. Toyota’s planned annual spending is about 48% higher than that of GM, which was downgraded to junk credit grade by Standard & Poor’s last week.

“As if Toyota wasn’t competitive enough, now they’re coming to the market with more investment in product and more features,” said Standard & Poor’s equity analyst Efraim Levy, who rates GM shares a “strong sell.” “That has to scare the competition. All it’s going to do is make Toyota stronger.”

The company will probably “maintain the same level of earnings” in the year ending March 31, 2006, said Senior Managing Director Takeshi Suzuki.

Toyota boosted its share of U.S. auto sales to a record 13%, grabbing market share from GM and Ford. It gained 1.1 percentage point in the quarter, its largest increase in eight years.

Having topped Ford in 2003 as the world’s second-largest carmaker by unit sales, Toyota is aiming to raise its global market share to 15% next decade from 12% now, which would put it ahead of GM in terms of the number of vehicles sold. Toyota’s revenue in the quarter ended March 31 surpassed GM’s by $300 million, based on Tuesday’s exchange rate.

The automaker is increasing production abroad to reduce the risk of currency fluctuations, as the Japanese yen was 2.5% higher against the dollar in the quarter. Toyota will build Tundra pickup trucks in Texas next year at its fourth U.S. plant.

The company’s annual profit rose less than 1% to 1.17 trillion yen ($11 billion) in the 12 months ended March 31, from 1.16 trillion yen a year earlier. Sales gained 7% to 18.55 trillion yen ($176 billion) in the period.