Sergio Marchionne, prick up your ears.

Toyota Motor, the once-mighty money machine that grabbed the crown of world’s biggest automaker from General Motors last year, gave a shocking loss forecast today for a staggering $8.6 billion for this year. Culprits are aplenty, but one of them is the company’s mammoth size.

Until the economic crisis slammed the brakes on car sales last year, Toyota couldn’t build them fast enough. To catch up with demand, Toyota put up more factories, from China to the Czech Republic. Reaching annual sales of 10 million vehicles – a feat never achieved by any automaker to date - looked imminent for the 70-year-old carmaker.

Now that rapid expansion has come back to haunt it. With consumers holding back on car purchases the world over, Toyota’s sprawling manufacturing facilities are a liability. Tumbling sales are forcing dozens of its factories to work half-days, costing the company billions. This year, it expects to build 6.3 million vehicles — 800,000 fewer than it did in the year that ended on March 31.

Size is a tricky business. Economics says that scale breeds savings, but at the same time, it makes carmakers less nimble. Striking a balance can be tough even for a company like Toyota, which has grown organically as an independent carmaker. Rivals such as General Motors and Volkswagen, meanwhile, have become bigger partly by scooping up brands, often outside their home markets, so achieving synergies is even more difficult.

In the late 1990s, former Daimler-Benz Chairman Juergen Schrempp had a vision of creating an auto empire and took over Chrysler to form DaimlerChrysler, which went on to buy stakes in Japan’s Mitsubishi Motors and South Korea’s Hyundai Motor. Now, all of those ties have effectively been severed. The moral of Schrempp’s failure was: Size isn’t the formula for success.

It’s puzzling, then, that Sergio Marchionne, the dynamic chief executive of Italy’s Fiat, is treading a similar path.

The Italian-Canadian CEO is looking to super-size Fiat by combining with the newly bankrupt Chrysler and GM’s German arm, Opel, in the belief that the Italian carmaker needs the resulting “industrial efficiency” to survive. Toyota’s announcement today should be a wake-up call for Mr Marchionne.