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Toyota Motor Europe sold 634,000 automobiles in 2000. Europe was the second largest foreign market for Toyota, behind only North America. Toyota Motor Europe expected significant growth in European sales and was planning to expand European manufacturing and sales to 800,000 units by 2005. But for fiscal 2001, the unit reported operating losses of YEN 9.897 billion (USD 82.5 million).

Toyota Motor Europe had three assembly plants in the United Kingdom, one plant in Turkey and one in Portugal. In November 2000, Toyota Motor Europe announced publicly that it would not generate profits for the next two years, due to the weakness of the Euro. Toyota had recently introduced a new model to the European market, the Yaris, a super small vehicle with a 1,000cc engine, had sold more than 180,000 units in 2000. Although the Yaris had been specifically designed for the European market, the decision had been made early on to manufacture it in Japan. One source of the continuing operating losses was the falling value of the Euro. Throughout 1999 and the first half of 2000, the Yen strengthened against the Euro. Although the Euro regained some ground in late 2000, it remained relatively weak.