Toyota Cuts Bonus Payments

Toyota Motor ( TM - Analyst Report ) has decided to cut winter bonus payments for its managers and union workers in Japan in order to keep the company afloat by managing its largest-ever recall in the U.S. and meeting its annual forecasts. The company announced that it will slash bonus payments for 8,700 managers in Japan by 20% and for union workers by 18% on a year-over-year basis.

Managers are entitled to twice-a-year performance linked bonus payments in addition to their monthly salaries. However, Toyota sought a reduction in bonus payments in order to manage its recently implemented largest-ever recall of 3.8 million vehicles in the U.S, which would entail huge cost.

Toyota assured that it will address problems with sudden acceleration in some of its U.S. models by replacing the gas pedals on the recalled vehicles. The recall involved popular vehicles such as the Toyota Camry (2007–10 model year) – the top-selling passenger car in the U.S., and the Toyota Prius (2004–09) – the best-selling gas-electric hybrid, apart from Toyota Avalon (2005–10), Toyota Tacoma (2005–10), Toyota Tundra (2007–10) and Lexus (2007–10 ES350 and 2006–10 IS250/350).

Toyota returned to profitability in the second quarter of fiscal 2010 after reporting losses since the third quarter of fiscal 2009. The company posted a profit of ¥21.8 billion ($232 million) or ¥6.96 (7 cents) per share. This was attributed to government incentive programs across the world – such as “Cash for Clunkers” in the U.S – that helped the company recoup its market share.

Toyota lowered its loss forecast for the fiscal year ending March 31, 2010 to ¥200 billion ($2.2 billion) from its earlier projection of ¥450 billion ($5 billion). According to the Nikkei – Japan’s biggest business newspaper – the annual earnings forecast will not be changed whatsoever the disturbances may be.