Good news, but mostly bad news from Toyota's CEO Akio Toyoda, as he reveals a 77% decline in profits.

This is an updated version of the report TheDetroitBureau.com initially posted.

Slammed by a devastating earthquake, tsunami and subsequent nuclear crisis, Toyota Motor Co. says its profits for the first three months of 2011 plunged 77%, dipping to their lowest levels in nearly two years. Net income came in at 25.4 billion yen, or $314 million, down from 112.2 billion yen during the same period in 2010.

Though the maker said it is speeding up efforts to restore its global production network to full operations, Toyota officials warned they won’t have a full sense of just how big an impact the March 11 disaster will have on future profits for some time.

The quake alone wasn’t the only problem shaking Toyota’s traditionally solid finances.  The strong yen has made it increasingly difficult to export from home market plants, leading CEO Akio Toyoda to acknowledge, during a Tokyo news conference, that, “I fully understand that we can’t go on with just a desire to protect manufacturing in Japan,” Toyoda, 55, said.

The quake-spawned crisis put a downward spin not only on the final months of Toyota’s fiscal year, which ended on March 31, but hints at further problems ahead.  With some lingering effects likely to be felt through year-end, Toyota is all but certain to lose its crown as global sales leader, while profits are expected to be depressed, as well.

For the January – March quarter, Toyota estimates it lost 170,000 sales due to the quake.  But analysts believe that lost production, so far, is in excess of 500,000 vehicles, a figure mounting daily.

Late last month, CEO Toyoda warned that it will likely be November, possibly even December, before production is back to normal.  In a brief bit of good news, however, a statement from the Toyota family heir noted that “Our efforts at production normalization have been progressing faster” than expected, meaning the maker hopes to have global operations back up to 70% of their normal production levels by June.

But Toyota has clearly been hit harder than many of its competitors, including Nissan and Honda, in part because it produces more of its vehicles in quake-prone Japan – about 45% of its global volume last year.  That may change.

“How much longer should we insist on producing in Japan?” asked Chief Financial Officer Satoshi Ozawa, during a news conference in Tokyo.

The quake occurred during the final weeks of the fiscal year, so the impact was actually somewhat modest in terms of the latest earnings report.  Toyota officials acknowledged the maker’s results show the negative impact of a variety of other factors, notably including the strong yen, which has hurt sales in foreign markets, including the United States.

The strong yen cut 290 billion yen, or $3.58 billion, from Toyota’s net, nearly three times the 110 billion negative impact of the quake during the January – March quarter.

The increasingly lopsided yen/dollar exchange rate raises further questions about Toyota’s dependence on its Japanese production base, said Ozawa, suggesting, “I feel strongly that our efforts may have exceeded the limits of what is possible in dealing with the yen’s impact.”

Increasing raw materials costs have also been a serious problem.  And sales in the Japanese home market were hurt during the fiscal year’s final quarter due to the ending of a vehicle scrappage program designed to get old products off the road.

There were some positives hidden in the results, Toyota officials noted.  Rising used car prices in the U.S. helped improve residuals – translating into reduced losses on off-lease vehicle returns, while loan losses also declined.

What is now being referred to as “the Great East Japan Earthquake” came just as Toyota was beginning to recover from the impact of a long-running safety scandal that saw it recall more than 10 million vehicles for a variety of problems, including excessive corrosion and sticky accelerator pedals.

Ironically, the disaster came just days after CEO Toyoda outlined his so-called “Global Vision,” a strategy aimed at boosting sales, restoring quality and improving profitability by slashing costs.  Digging through the numbers and setting aside the impact of the quake, the executive said, reveals that the plan is already having a positive impact.

“We are steadily improving in our profit improvement efforts,” he said in his statement.

Nonetheless, the maker said it is not yet ready to predict just what it expects its financial picture to be for the rest of the year because it still has plenty of work to do calculating the impact of the March disaster.  Though the maker plans to announce a continued dividend at its upcoming shareholders meeting, it acknowledged it won’t be able to issue its financial outlook until at least mid-June.

One reason is that production appears to be coming back up to normal a bit faster than expected, but there’s also the question of model mix.  Initially, the maker put an emphasis on maintaining production of key products like the Prius, the world’s most popular hybrid-electric vehicle.  But Senior Managing Director Takahiko Ijichi suggested, during a conference call, that Toyota could push for a richer mix, as production ramps up, by focusing on higher-profit models, like the Lexus LS, rather than entry offerings, such as the Yaris subcompact.

Industry analysts agree that Toyota will fall significantly short of its original sales targets for 2011, and will almost certainly fall to second place, behind General Motors, in the global auto sales race, and possibly even to third, behind Volkswagen AG.

The maker is clearly hoping the impact will be temporary, and is taking steps to continue rebuilding its reputation, damaged by the safety scare.  But some observers believe that Toyota could face a tougher time, longer-term, because of its product shortages.

Research by the firm CNW Marketing show that loyalty to the Toyota brand has been slipping and that buyers “won’t wait” long for an out-of-stock product, according to CNW chief analyst Art Spinella.  The situation could be compounded by the fact that not only has Toyota trimmed factory incentives but dealers have been tacking on premiums, as much as $3,000 for the Prius, according to TrueCar.com.