Toyota Wields the Budget Axe

Toyota reported a 69-percent decline in its quarterly profit Thursday, a deeper drop than analysts predicted. Reporting losses in both the U.S. and Europe, the automaker also downgraded goals for vehicle sales and profits for the remainder of its fiscal year that ends March 31, 2009.

Toyota established an emergency team, headed by company President Katsuaki Watanabe, to look at ways to cut costs and improve profits. Among moves to be considered: re-evaluating vehicles in the pipeline for overall reduction or in terms of timing and scale; cutting capital spending; adjusting factory production to meet lower customer demand; and revising pricing by models and regions globally.

In the U.S. specifically, Toyota said it would launch "market-creating new models" such as the newly introduced Venza, "in order to stimulate market demand.

As for incentives, Toyota doesn't anticipate the amount of total incentives to be spent in the U.S. to change; however, it plans to redistribute those incentives so they aren't skewed so heavily toward trucks and SUVs. Earlier this year, Toyota spent heavily on incentives for its slow-selling Toyota Tundra and large SUVs. Now that inventories of those models have been reduced through closing the factories for months, the focus of Toyota's incentives will shift to other models. Of late, Toyota has been offering zero-percent financing on a number of 2009 models.

Hybrids remain the sacred cows of Toyota. In a conference call with financial analysts and media Thursday, Toyota executives said the automaker, already dominating in hybrids with its popular Prius, will "accelerate its hybrid strategy," as hybrids are critical to Toyota's future competitive position. That strategy includes the introduction in Japan of four new hybrids, including the next-generation of the Prius, next year.

Inside Line says: More deals on Toyotas other than Tundras and more hybrid choices. — Michelle Krebs, Editor, Edmunds' AutoObserver.com