TOYOTA Motor Corp, the world's second-largest auto maker, may cut its full-year earnings forecast because of slowing global car demand and a stronger yen, analysts said. The shares plunged the most in almost 21 years.

Toyota's operating profit may fall as much as 52 percent to 1.1 trillion yen (US$10.9 billion) for the year ending March 31 from 2.27 trillion yen in the previous year, according to three analysts surveyed by Bloomberg News. That compares with Toyota's goal of 1.6 trillion yen for this fiscal year.

The collapse of the mortgage market in the United States, where Toyota gets about half its operating profit, has driven sales down the most in more than 20 years. The company is offering no- interest loans on 11 models including Camry sedans and Corolla small cars after sales in the country plummeted 32 percent last month.

'The US economy is deteriorating day by day,' said Ichiro Takamatsu, chief investment officer at Tokyo-based hedge fund Alphex Investments Co. 'The situation surrounding Toyota and other Japanese auto makers won't get better anytime soon, because auto demand is falling not just in the US but everywhere.'

Toyota dropped 11.6 percent to close at 3,280 yen, the biggest decline since October 1987, on the Tokyo Stock Exchange yesterday.

The car maker has fallen 46 percent this year, set for its worst annual performance in at least 33 years. It has lost its spot as the world's largest car maker by market capitalization to Volkswagen AG.

Toyota's full-year operating profit will fall to 1.3 trillion yen this year, the Nikkei newspaper reported, without saying where it got the information. Toyota spokesman Hideaki Homma declined to comment on the Nikkei report.

'We expect Toyota's earnings to deteriorate sharply this fiscal year and next,' Noriyuki Matsushima, a Tokyo-based analyst at Nikko Citigroup Ltd, said.






'A major revision to management strategy is unavoidable. There is a risk the share price will continue to decline until there is greater clarity on changes in Toyota's management strategy.'

Higher fuel costs and tight credit have sapped demand for large vehicles, forcing the car maker to halt production of Tundra pickups and Sequoia sport-utility vehicles in the US for three months through November. Toyota President Katsuaki Watanabe last week said the US market may not reach 14 million vehicles this year. Industry wide sales shrank to an annualized rate of 12.5 million in September.

The yen has strengthened more than Toyota's assumption against both the dollar and euro, adding pressure on the auto maker's earnings.