The crisis facing the world's largest car-makers intensified yesterday as Japanese giant Toyota, which last year reported record profits, forecast its first-ever annual operating loss. The world's biggest carmaker blamed a continued slide in vehicle sales and a rise in the Japanese yen for the first such loss in its 71-year history.

Toyota cut its group operating forecast to a loss of Y150bn (£1.1bn) for the year to the end of March, after shocking financial markets last month by slashing the same forecast by Y1trillion to Y600bn. It made a record profit of Y2.27 trillion only last year.

Toyota now expects to make a net profit of Y50bn — a fraction of the previously-forecast Y550bn.

Automakers around the world face their toughest business environment in recent memory, due to a sharp fall in demand as the global financial crisis spreads, squeezing credit and consumer confidence.

Like the rest of the industry, Toyota has mothballed factories, slowed assembly lines and delayed manufacturing projects, such as the start of a US plant under construction in Mississippi to build the Prius hybrid model, and said it would continue those moves until the tide turned.

The company will also postpone all projects to expand capacity, move 16 of its 75 global assembly lines to a single shift, and cancel directors' bonus payments for this year, among a wide range of steps aimed at improving near-term profitability, said the carmaker's president Katsuaki Watanabe. He warned: “The change that has hit the world economy is of a critical scale that comes once in 100 years.”

Even the electric hand dryers at the company's Nagoya office building have been unplugged in an effort to cut costs.

Mr Watanabe stopped short of projecting what global car sales and earnings would do next year, saying only that Toyota hoped to return to profit and cut capital spending to below Y1 tn, compared with the Y1.4 tn planned this year.

Elsewhere in Japan, small-car makers Suzuki and Daihatsu announced more production cuts, of 29,000 units and 16,000 units, respectively, by the end of March, along with a reduction of non-permanent workers.

In the US automakers are in even bigger trouble, with President Bush throwing General Motors and Chrysler a lifeline of up to $17.4 bn to stave off bankruptcy. Ford had early this year sold India's Tata Motors its Jaguar and Land Rover units as it tried to raise cash by selling non-core businesses.

A spokesman for Tata said yesterday it will "do its best to resource all its businesses" including Jaguar and Land Rover, in response to a report it has agreed to inject "tens of millions" of pounds into the two luxury brands to prevent an immediate cash flow crisis.

Ford, which had also sold its Aston Martin business to Middle-Eastern investor in 2007 as it shed non-core units, is now even considering selling its much bigger and more profitable Volvo brand as it tries to get enough cash into the door to stay alive.

And in a glimpse of how a collapse in car manufacturing would affect the rest of the economy, automotive parts suppliers yesterday also took steps to reduce capacity.

Bridgestone, Japan's largest tyre maker, cut its operating profit forecast for 2008 by 24% to Y118bn on slower tyre demand for new cars and replacement purposes. Its French rival Michelin said it faced costs of nearly €150 m as it cuts back operations to cope with a decline in tyre demand.