Almost no one expected any of the world’s largest car companies to make money this year. Sales around the globe are simply down too much and efforts to cut costs have not been enough to match the drop-off in revenue.

Ford (NYSE:F) shocked Wall St. by making almost $1 billion in the third quarter. Even more of a surprise, it made money in its flagging North American operations.

A second surprise profit was posted today, by the world’s largest car company, Toyota (NYSE:TM)

The turnaround at the Japanese company began when its board promoted the founder’s grandson into the CEO’s job. Some of what he has done with the company, especially cutting costs by nearly $4 billion, has seemed to have worked.

In Toyota’s second fiscal quarter, the company’s net fell 84% to 22 billion yen and revenue was down 24% to 4.54 trillion yen. No one knows whether Toyota can stay in the black, but it may have a hard time doing so.

The US and governments in several other developed nations have offered special incentives to buy cars. Those programs are over. It may be that “cash for clunkers” plans which have done well enough will be repeated as a way to further bolster the car industry in some nations where manufacturers have done the most poorly.

Toyota will have a problem, if demand does not pick up in 2010. The costs cuts it has put into place are so deep, that the cannot be duplicated. The saving clearly bring down Toyota’s breakeven point, but they are two large to be repeated.

Toyota can take some comfort from the fact that sales of cars and light vehicles in the US are expected to go from about 10.1 million in 2009 to 11 million in 2010. Toyota has about 17% of the American auto market. A modest increase in overall unit sales and some pick-up in Toyota’s market share could be enough to put Toyota in the black in its next fiscal, which begins in April of next year.

Douglas A. McIntyre

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