Toyota set to slam into red for first time in 70 years

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In a dramatic profit warning, Toyota, the heartbeat of the Japanese industrial economy, said it will slump into the red for the first time since 1938, crashing to a 150 billion yen (£1.1 billion) loss against a previously expected 600 billion yen operating profit.

The news will be a shock for Toyota's nearly 5000 UK workers, who over 20 years have built the firm into one of Britain's most important carmakers.

The warning comes days after the $17 billion (£11 billion) bailout of the US carmaking industry after a worldwide collapse in motor sales. Toyota says it now expects to sell 700,000, or 8.5%, fewer cars this year, taking total sales down to just over 7.5 million

The recent slump has been even more dramatic, Toyota sales falling 34% in both the US and Europe. Latest statistics reveal monthly UK year-on-year sales down by more than 40%.

In the UK, where Toyota is the sixth-largest seller, sales are down by 11% in the past year, though even poorer performances by French carmakers mean Toyota is taking market share from fourth- and fifth-largest sellers Peugeot and Renault.

Daiwa Securities Investments chief Koichi Ogawa said: "This is very, very, very bad. There's a chance they could fall into the red in the next business year as well. Toyota's cost-cutting can't match plummeting sales. Everyone is getting hurt with this situation. This is not just a problem for Toyota. What is good for Toyota is good for the Japanese economy."

The situation will be watched closely in Derbyshire, where Toyota employs more than 4000 people at its Burnaston plant assembling Avensis, Corolla and Auris models.

A further 700 workers are employed making engines at Deeside in North Wales. Toyota is reckoned to have invested more than £2 billion in British carmaking.

After a decade and a half of losses its UK operations became profitable in 2004 when it produced 213,000 vehicles, many for export to Europe.

Prime Minister Gordon Brown was at Burnaston last year to see the first Auris come off the production line.