Toyota quarterly profit drops 28 percent

Toyota's profit for the January-March quarter sank 28 percent from the previous year as a strengthening yen and lagging North American sales chipped away at the Japanese automaker's earnings.

Toyota, the maker of the Prius gas-electric hybrid and Camry sedan, forecast even tougher times ahead. For the current fiscal year through March 2009, it said Thursday that it expects sales to drop for the first time in nine years — and net profit to plunge 27 percent.

The pessimistic outlook for this year underlines how even Toyota — with its small cars reputed for good gas mileage — hasn't emerged unscathed from the risks of a global slowdown, a U.S. credit crunch, volatile currency fluctuations and soaring material and energy costs.

"We are facing a severe business environment," Toyota President Katsuaki Watanabe said. "Toyota considers this headwind as a valuable opportunity to turn it into a more flexible and stronger company."