Toyota expects costs and lost sales from its massive safety recall to total $2 billion by the end of March, keeping it in the red for the year despite its strongest profit in six quarters.
Toyota's recall of more than 8 million vehicles due to problems with unintended acceleration has wiped out $30 billion in share value, hurt its reputation and overshadowed what until just two weeks ago had been expected to be an upbeat story of improving earnings.
In a further blow, Toyota said today that it is looking into dozens of complaints about inadequate braking on its new Prius hybrid on bumpy or frozen roads. Toyota said it had identified and fixed a software problem related to its anti-lock braking system.
A Toyota quality official said depressing the brakes further would activate normal braking on the car, meaning the glitch was not legally considered a safety hazard.
Car makers enjoyed a boost in demand in the latter part of 2009, thanks largely to government incentives designed to spur sales and improving access to credit as the global economy recovered.
Toyota was one of the biggest beneficiaries of the US cash-for-clunkers scheme, allowing it to post its best quarterly operating profit since early 2008 in the three months to December.
But the world's largest car maker is now under investigation for its handling of the recall of a host of its most popular models including the Camry, Corolla and Rav4.
Up to 19 US crash deaths over the past decade may be linked to accelerator-related problems at Toyota, congressional officials have said.
With less than two months left in the current financial year, Toyota slashed what most analysts had considered an excessively conservative operating loss forecast to 20 billion yen ($220m) from 350 billion yen.
A Toyota official said the new forecasts for the current year took into account up to $2 billion lost from the recall - an estimated 100 billion yen in costs and a further 70-80 billion yen in lost sales, in line with analysts estimates.
Senior Managing Director Takahiko Ijichi said the company was unsure about the impact beyond the end of this financial year, but investors expressed their concerns.
Toyota's new forecast for the year to March compares with a 38 billion yen annual loss forecast by analysts.
Investors have now turned their focus on how long and far the damage would go, with Toyota's sales in its most important US market already falling 16% in January - enough to knock it to third place, below Ford.
