Toyota’s Earnings Jump 39% on Strong U.S. Sales

Soaring U.S. gasoline prices may be depressing to its rivals and even many of its potential customers, but they have been a boon to Toyota Motor Corp.

Japan’s biggest automaker posted a 39.2% increase in profit for its fiscal first quarter Friday, a hefty jump helped by booming U.S. sales and a weaker yen that boosted the value of the company’s overseas sales.

Much of the automaker’s growth came in North America, where Toyota is soaring on the strength of its reputation for building fuel-efficient cars.

“Consumers are shifting to compact cars as the price of oil surges,” said Takeshi Suzuki, Toyota’s senior managing director, at a Tokyo news conference. “Overall profit hasn’t been affected since we are paying less in incentives and selling more in the U.S.”

Even an unusually large number of recalls of Toyota vehicles this year and last has not damped U.S. consumers’ enthusiasm for its cars or the newly redesigned RAV4 small SUV. Sales of the RAV4, in fact, have more than doubled through the first seven months this year.

Other hits in Toyota’s U.S. stable include the new FJ Cruiser SUV; the industry-leading Prius gasoline-electric hybrid and the new hybrid Camry sedan; the Corolla compact sedan; all three of the youth-oriented Scion models; the new Yaris subcompact and the redesigned Lexus IS sedan.

Sales of Toyota’s Tundra large pickup and Highlander and Sequoia sport utility vehicles have slumped -- as have other manufacturers’ trucks -- as U.S. gasoline prices continue to push shoppers back into more fuel-efficient cars and small SUVs.

Although sales of the company’s bestselling mid-size car, the Camry, have slipped slightly this summer, the sedan remains the top family model in the U.S. Toyota dealers sold 248,000 Camrys through July, including 12,409 hybrid models.

“Toyota’s got a combination of strong products already on the ground and new products being introduced that’s pretty hard to top,” said auto analyst George Peterson, president of AutoPacific market research in Tustin.

Notably, the company outsold Ford Motor Co. in July to become -- for the first time -- the No. 2 auto retailer in the U.S. behind General Motors Corp.

Toyota’s cumulative sales through July, up 10.1% from a year earlier, put the company solidly in third place for the year, trailing GM and Ford but keeping it well ahead of DaimlerChrysler’s Chrysler Group.

Globally, Toyota sold 2.1 million cars and trucks, up 7.3% from the first seven months of 2005. Nearly three-quarters of the increase came from North American sales.

That translated into stellar first-quarter results. Net income totaled 371.5 billion yen ($3.23 billion) for the period ended June 30, up from 266.9 billion yen a year earlier.

Sales rose 13% to 5.64 trillion yen ($49 billion).

“Toyota’s got all the important segments and markets covered very well,” Ashvin Chotai, a London-based automotive analyst for Global Insight Inc., told Bloomberg News. “Toyota’s making money on each car, while GM is just moving metal.”

Toyota also said that a weaker yen compared with last year increased its first-quarter operating profit by 100 billion yen ($869.5 million). A weak yen means each dollar or euro is worth more when converted to yen in Japan.

Even with its recent success, especially as its U.S. rivals struggle, Toyota faces its own challenges.

The company, which has consistently led quality surveys conducted by J.D. Power & Associates, doubled the number of vehicles it recalled in the U.S. last year and this year has had more recalls in Japan than any of its domestic rivals.

The automaker said Thursday that it would more closely monitor possible defects after the Japanese government began a probe into recalls.

Toyota reiterated its earlier earnings forecast for the year ending in March, predicting a 4.5% net profit decline but a 1.2% increase in operating profit and a 6% gain in sales.

Shares of Toyota rose $1.17, or 1.1%, on Friday to $108.14.