Press Release

DBRS Confirms Toyota at AAA

Banking Organizations
April 27, 2007

DBRS has today confirmed the Issuer Rating of Toyota Motor Corporation (Toyota or the Company) at AAA with a Stable trend. Toyota’s ratings remain on track as the Company’s business profile continues to be very strong, in stark contrast with its North American based peers. While Ford and General Motors are struggling to preserve share in their native U.S. market and are facing significant contraction, Toyota continues to maintain a dominant share (above 40%) in Japan and remains unbridled in pursuing significant expansion in North America, despite the surplus capacity of the industry in that region. While the Company’s progress in Europe and China is considerably slower (similar to other Asian original equipment manufacturers), Toyota nonetheless remains poised to overtake General Motors as the world’s largest global automotive manufacturer and is well on course towards achieving its stated global market share objective of 15% by 2010.

Toyota’s success remains underpinned by its enviable reputation for quality and technology, with the Company’s hybrid technology generating much favourable publicity despite accounting for a small fraction (less than 5%) of total unit sales.

The Company’s biggest hurdle over the medium term revolves around its ability to successfully implement its increasing growth rate (particularly in the United States) while still preserving its leadership status in quality. Toyota faced brief adversity with numerous product recalls in the summer of 2006. The Company has revised the introduction of certain models to help ensure successful product launches and preserve Toyota’s sales and profitability momentum. The revamped Camry has been very well received and the Company continues to make further inroads in the North American light-truck market with the successful launch of the Tundra model.

In other global markets, Toyota’s Innovative and International Multipurpose Vehicle (IMV) project reinforces the Company’s leadership in lean and flexible production with the ability to respond promptly to demand fluctuations across various markets.

In line with its North American expansion, Toyota has significantly augmented capital expenditures, which reached ¥1.5 trillion in fiscal 2006, a 43% increase year-over-year. However, the Company still generated approximately ¥1.4 trillion in net income and ¥475 billion (approximately US$4.0 billion) in free cash flow (before working capital changes). DBRS expects the Company to slightly exceed these levels of cash flow and profitability over the near- to medium-term.

Despite its global expansion, the majority of Toyota’s manufacturing continues to be sourced in Japan, where the Company remains a net exporter. As such, the Company is very sensitive to the yen, whose decline over the past couple of years has further boosted profitability.

Toyota’s profitability and cash generation have enabled it to readily pursue expansion objectives while preserving its stellar financial profile (Toyota being cash positive on a net basis). Additionally, the Company has returned approximately ¥1.3 trillion to shareholders in the past three fiscal years in the form of dividends and share repurchases. DBRS expects the Company to maintain its financial profile and moderate such activities in the event of lower free cash flow, with such financial discipline further reinforcing the assigned ratings.

Note:
All figures in Japanese yen unless otherwise noted.

Ratings

Toyota Credit Canada Inc.
  • Date Issued:Apr 27, 2007
  • Rating Action:Confirmed
  • Ratings:R-1 (high)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Apr 27, 2007
  • Rating Action:Confirmed
  • Ratings:AAA
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
Toyota Financial Services Corporation
  • Date Issued:Apr 27, 2007
  • Rating Action:Confirmed
  • Ratings:AAA
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • Date Issued:Apr 27, 2007
  • Rating Action:Confirmed
  • Ratings:R-1 (high)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
Toyota Kreditbank Gmbh
  • Date Issued:Apr 27, 2007
  • Rating Action:New Rating
  • Ratings:AAA
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
Toyota Motor Corporation
  • Date Issued:Apr 27, 2007
  • Rating Action:Confirmed
  • Ratings:AAA
  • Trend:Stb
  • Rating Recovery:
  • Issued:CA
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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