GM Generali

By Myra P. Saefong

Shares of major automakers in Asia traded mostly lower Monday as the industry continued to reel from news that the world's largest carmaker had posted its first-ever annual loss.

"It was an extremely difficult operating environment for the automakers during the quarter (and past 12 months), and it doesn't appear to be getting any easier," David Silver, an analyst at Wall Street Strategies, wrote in a recent research note.

"The Japanese yen has remained stubbornly high, but the fact remains once the economy in the United States begins to turn, other economies around the world will follow," he said.

Toyota Motor Corp. (TM) reported Friday a $7.7 billion quarterly loss and forecast another loss for the current fiscal year.

"The company reported its first loss since becoming a public company in 1950," said Silver.

Toyota had already warned it would report full-year loss, which Silver said was the first since it became a public company in 1950.

However, the warning, issued in February had called for a net loss of 350 billion yen ($3.6 billion). The actual result was a larger loss of 437 billion yen. A year earlier, Toyota saw a net profit of 1.72 trillion yen.

During Monday's morning session, shares of Toyota fell by 5%.

Other automakers also headed lower, with Honda Motor Co. (HMC) falling 3.1%, Nissan Motors shares (NSANY) down 4.4%, and Mazda Motor Corp. (7261.TO) losing 4.1% in Tokyo.

In Seoul, shares of Hyundai Motor Co. (HYMTF) fell by 1.7%.

Nissan and Mazda are scheduled to report their financial results on Tuesday.

Isuzu Motors (ISUZY) saw its stock climb 0.5% in Tokyo ahead of its fiscal year results due later Monday. The company expects to report a net loss of 15.85 billion yen.

Kia Motors Corp. (KIMTF) also managed to climb 1.8% in Seoul, and shares of mainland China's Dongfeng Motor Group were 4.5% higher.

The share moves came amid mixed trading in the broader Asian markets. The Nikkei 225 Average fell 0.9% in Tokyo, and the broader Topix fell 0.1%, but Hong Kong's Hang Seng Index was up 0.8% and the China Shanghai Composite gained 0.9%.

Challenges abound

Toyota's losses were "primarily linked to the plunge in sales," said Silver.

Its rivals have, of course, been taking similar hits. Ford Motor Co. (F) in April saw its U.S. vehicle sales drop by 32%, but it still outsold Toyota for the first time in at least a year, according to a note from analysts at Canaccord Adams released on May 4.

"You know things suck when dropping 32% ranks you No. 1," analysts at Canaccord said in last week's note.

The Japan Automobile Importers Association reported that sales of imported motor vehicles in Japan, including those made by Japanese carmakers overseas, dropped for a 12th month in a row, down 30.5% from a year earlier to 11,348 units in April, according to a Kyodo News report on the data.

And many companies have been hurt by the strength in the Japanese yen.

Honda, for example, cited the recently strong yen as a major reason for the 77% drop in its fiscal year income.

In Asian trade Monday, one U.S. dollar bought 98.37 yen, down from 98.93 yen on Friday.

But despite the sales and currency headwinds, Wall Street Strategies' Silver is still bullish, reiterating his recommendation to buy Toyota stock regardless of the expected loss for the current fiscal year.

"We feel the company is best positioned to capitalize on the eventual rebound in auto sales," he said.

And "the fact remains that despite the steep drop, General Motors and Toyota are still No. 1 and No. 2 in the market," he said.

He also noted weakness in Toyota's U.S. competitors.

With "bankruptcy rumors circling around General Motors, and the [bankruptcy] filing by Chrysler, the American marketplace is wide open for another player to try to enter," he said.

Chrysler LLC fell into bankruptcy in late April and last week said it expects billions of dollars in losses in the coming years.

On Thursday, U.S.-based General Motors Corp. (GM) said it lost $6 billion as revenue was cut almost in half.