Toyota vulnerable after chasing fast growth

By Chang-Ran Kim, Asia autos correspondent

TOKYO (Reuters) - Toyota's shock profit warning shows its strategy of breakneck expansion has left it especially exposed to an industry crunch brought on by the global financial crisis.

As recently as last year, Toyota was riding high after eight years of earnings growth, during which time profits more than tripled and sales mushroomed to make it the world's biggest carmaker ahead of General Motors.

But Thursday's grim warning that profits would shrink by three-quarters this year was proof that even the mightiest are at risk from the current turmoil, raising the need for increased flexibility and, some say, more prudent investment from the Japanese giant.

"Toyota has become used to carrying excessive investment, and this has left it vulnerable in a downswing," said JPMorgan Securities analyst Takaki Nakanishi, who has a neutral rating on the company.

"It's important to recognise that the current steep decline in Toyota's earnings is not only a cyclical problem -- the downturn has been exacerbated by its own structural problems."

The worst financial crisis since the Great Depression has sent car sales tumbling in the developed world and slammed the brakes on growth in emerging markets, dealing a blow to automakers everywhere.

Japanese automakers have also been crippled by a soaring yen, which makes exports less competitive and diminishes the value of earnings made overseas.

Even so, the 63 percent cut in Toyota's operating profit forecast to 600 billion yen (3.9 billion pounds), a 13-year low, was far beyond the most bearish forecasts and highlighted the severity relative to its domestic rivals.