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Read this article from the NYT which I found surprising. Despite the massive recalls and lawsuits that Toyota has faced this year they still managed to post a $2.2 billion profit from aggressive customer incentives and massive cost cutting. Read the article after the jump.

Despite being mired in recalls and inquiries into its safety record, Toyota roared back to a profit in the fiscal year that just ended and forecast on Tuesday a further increase in earnings.

Toyota had a particularly strong performance in the three months through March — the period when the Japanese automaker recalled millions of cars and was under the intense scrutiny of consumers and governments around the world.

Profit for the three months was 112 billion yen ($1.2 billion), in contrast to a 766 billion yen loss the year before, as the automaker slashed costs and introduced aggressive sales incentives that lured customers back to its showrooms.

Quarterly revenue jumped to 5.28 trillion yen, from 3.54 trillion yen the previous year, when car sales slumped in the middle of the global financial crisis. Revenues showed an especially strong rebound in the Chinese market and in the United States, while sales in Europe and Japan continued to slump.

In March, global sales rose 26 percent from the previous year, partly because of generous incentives offered in the United States, while global production surged 80 percent.

“After taking over amid a storm, I wanted to do anything to avoid a third straight year in the red,” Akio Toyoda, president of Toyota, said after the earnings announcement.

“These results follow tough and anguishing decisions” on the part of Toyota’s management, he said, referring to the automaker’s dismissal of workers both in Japan and overseas amid companywide cost cuts.

Toyota estimated that its profit would rise to 310 billion yen ($3.34 billion) in the year that will end in March 2011. It expects to sell 7.29 million units, or 53,000 more than it sold this year, the automaker said. Toyota also announced a cash dividend for the full fiscal year of 45 yen a share.

For the business year that just ended, net income rebounded to 209.4 billion yen ($2.25 billion), from a loss of 437 billion yen the previous year.

“We’re still in a storm — there’s been no change on that front,” Mr. Toyoda said. “But from the storm, we’ve begun to see glimpses of sunny but faraway skies,” he said. “I feel that we’re starting to approach safer waters.”

Still, the automaker faces tough challenges ahead. It has come under renewed scrutiny in the United States, where the National Highway Traffic Safety Administration opened yet another inquiry Monday into the company’s handling of potentially dangerous problems.

The agency said it was investigating whether Toyota had waited too long to inform the agency of steering-relay rod defects in Hilux trucks after a 2004 recall in Japan for the same flaw. Automakers have five business days to report safety flaws to regulators under American law.

Toyota sells the Tacoma truck, similar to the Hilux model, in the United States. At that time, Toyota told regulators that the defect was in vehicles sold only in Japan and the company had not received similar information in the United States, the agency said. In 2005, Toyota told the agency that the defect was indeed in models sold in the United States and conducted a recall.

The Transportation Department is also looking through 500,000 pages of documents to determine whether to levy additional fines against the Japanese carmaker, a process that could take months.

Toyota has recalled more than nine million vehicles worldwide for faulty accelerator pedals and other problems that have tarnished the company’s reputation for making safe and reliable cars.

Toyota also faces multiple shareholder lawsuits, as well as consumer lawsuits claiming injuries or deaths caused by sudden acceleration incidents in Toyota vehicles.

In April, Toyota agreed to pay a $16.4 million fine imposed by the Transportation Department, the largest allowed by American law, which charged that the company had hidden information about one of the pedal-related recalls.

Toyota has not admitted fault. But it faces the possibility of at least two more such fines, although it could be several months before action is taken, the transportation secretary,Ray LaHood, said on Monday in Japan after a visit to Toyota’s headquarters in Toyota City.

Last month, Moody’s Investors Service cut Toyota’s credit rating, warning that the effects of recent recalls and a still-sluggish economy would weigh on the automaker’s bottom line for some time.

But Takahiko Ijichi, senior managing director at Toyota, suggested those fears were overblown. “The effects of the recall have been smaller than we’d expected,” Mr. Ijichi said. The company has said it spent 100 billion yen on recall-related measures, and lost 70 billion yen to 80 billion yen in sales during the year that ended March 31.

Mr. LaHood said Monday that he sensed a change of attitude at Toyota since February, when Mr. Toyoda solemnly faced questions before a Congressional panel and spoke with Toyota dealers, choking back tears.

The automaker, which faced “very, very serious credibility problems” after the crisis, has changed gears, while Mr. Toyoda has “listened and paid attention,” Mr. LaHood said.

via NYT