Nissan, Suzuki Slash Forecasts as Auto Gloom Deepens
Nissan Motor and Suzuki Motor capped a turbulent week for automakers everywhere with their own profit warnings on Friday, as executives predicted a rough ride for the foreseeable future.
On top of an economic slowdown around the world and a credit crisis that is shutting many consumers out of auto-loan financing, Japanese automakers are battling a stronger yen, which shaves the value of earnings made abroad.
"I have no idea how long this situation will last," Suzuki CEO Osamu Suzuki told a news conference.
"The crisis in the United States will probably ripple through the rest of the world like a tsunami, sooner or later."
Efforts by U.S. automakers Chrysler and General Motors to forge a merger to help them ride out the crisis hit a snag after the Bush administration ruled out funding the plan, sources told Reuters late on Thursday.
Joining a lengthening list of Japanese automakers, third-ranked Nissan more than halved its operating profit forecast for the year to March 31 to 270 billion yen ($2.7 billion) from 550 billion yen.
That would be just a third of last year's profit and is nowhere close to a forecast of 435 billion yen from a poll of 12 brokerages by Reuters Estimates.
It marks the third time in as many years that Nissan would be missing its guidance, cranking up the pressure on Carlos Ghosn, who also is grappling with sinking profitability at Renault in his dual-CEO role at the Franco-Japanese alliance.
Nissan, 44 percent owned by Renault, also retracted its annual dividend target of 42 yen, which had been viewed as doubtful given the slide in earnings and share price.
It will pay 11 yen for the first half and said the second payment would be disclosed next year.
The news weighed on Renault shares, which were down 4.7 percent, while Paris's CAC-40 index slipped 1.7 percent.
"The results were bad, but I think that's been priced in (to Nissan's shares) already," said Toshihiko Matsuno, assistant general manager at SMBC Friend Securities.
Nissan's shares fell to as low as 400 yen this week -- down two-thirds from this year's high and below the levels in 1999 when Ghosn arrived from Renault to help rescue the near-bankrupt company.
The stock closed at 493 yen on Friday, down 8.4 percent on the day.
Nissan has been announcing job cuts around the world to match its plan to reduce production by 200,000 vehicles from initial estimates.
That would lead to a loss of 2,500 salaried jobs overseas and 1,000 temporary workers in Japan, it said on Friday.
Nissan lowered its vehicle sales target to 3.77 million units from 3.9 million, hoping to match last year's performance.
Suzuki Issues First Profit Warning
Rival Suzuki Motor joined the fray, issuing its first-ever profit warning since it began reporting consolidated results a decade ago as the worst financial crisis in 80 years takes down even the healthiest automakers.
A maker of compact cars with about half of India's market, Suzuki cut its operating profit forecast 29 percent to 100 billion yen for the year to March 31.
A poll of 11 brokerages had put the operating profit at 124 billion yen.
While Suzuki has little exposure to the United States, it is feeling the pain of slowing European and Asian sales, and the yen's surge against the euro and a basket of Asian currencies.
The acute economic crises in Pakistan and Hungary -- where Suzuki has recently expanded production capacity -- have also added to worries about its outlook.
Nissan had made much of its commitment to a specific dividend as being shareholder-friendly and transparent, and rare among its peers.
But Ghosn had warned this week that the industry, treading in "uncharted territory", needed to change its priorities and identified healthy cash flow as a top concern.
Ghosn, who was not present at Friday's news conference, had also pointed to the importance of cash flow to downplay Nissan and Renault's interest in a deeper, strategic alliance with Chrysler.
Six U.S. governors and a group of top U.S. executives on Thursday urged the Bush administration to aid struggling Detriot automakers, but the White house rebuffed a request for direct support of a merger between GM and Chrysler.
For the July-September quarter, Nissan's operating profit fell 49 percent to 111.7 billion yen, while net profit sank 39 percent to 73.55 billion yen.
At Suzuki, second-quarter operating profit sank 30 percent to 26.89 billion yen.
Suzuki ended down 6.4 percent before the results.
In the year to date, shares of Nissan and Suzuki are down about 60 percent, underperforming the Tokyo's transport sub-index, which has fallen 45 percent.