Toyota Motor Corp.’s biggest suppliers are scaling back their profit forecasts as China’s auto market slowdown threatens their growth plans.
Denso Corp., the largest of Toyota’s parts makers, cut its annual net profit forecast by 88 billion yen ($2.9 billion) while announcing a massive share buyback program worth 450 billion yen. The company’s Executive Vice President Yasushi Matsui warned that weak Chinese demand could persist.
The downward revisions rippled through Toyota’s supply chain. Aisin Corp. reduced its profit outlook by 30 billion yen, while Toyota Industries Corp. lowered its growth projection to 7% from 14%. The latter also plans to divest its entire Denso shareholding, marking a significant shift in Japan’s traditional cross-shareholding structure.
The suppliers’ struggles mirror Toyota’s own challenges. The automaker’s global production fell 7% to 4.7 million units in April-September, its first decline in four years, hit by certification scandals in Japan and North American recalls.
Despite the headwinds, Denso still expects record profits, projecting a 40% increase in net income to 437 billion yen for the fiscal year ending March. The company’s shares closed up 1% at 2,217 yen in Tokyo trading after volatile swings following the announcements.
