The Auto Channel
The Largest Independent Automotive Research Resource
Official Website of the New Car Buyer

Isuzu Motor To Cut US Presence; Focus On Truck Operations

TOKYO -October 25, 2002; Yumiko Nishitani writing for Dow Jones reported that Isuzu Motor Ltd., officially announced Friday it will slash drastically its exposure to the North American sport-utility vehicle market - a market that once boosted the company's growth but has since turned sour amid intensified competition.

The company, which also plans to withdraw from recreational vehicle operations in Japan, will now stake its future on the truck business. However, with Japan's demand for trucks generally projected to remain on the decline, Isuzu may be heading down a bumpy road.

Isuzu, in which General Motors Corp. holds a 48.45% stake, Friday confirmed recent press reports that it will completely withdraw from an SUV- makaing joint venture in the U.S. with another GM-affiliate, Fuji Heavy Industries Ltd.

Isuzu will continue selling its SUVs made by Fuji Heavy at what is now their joint venture plant in Indiana, but at a much reduced rate. Isuzu expects to sell 30,000-40,000 SUVs a year in North America from 2003, compared with over 100,000 units only a few years ago.

"We will be released from losses in North America... We will now return to our original form and focus on the truck segment where we can make the best use of our technology," Isuzu President Yoshinori Ida told a news conference.

Isuzu will book a massive extraordinary loss of Y184.0 billion in the current fiscal year ending March to account for the costs of carrying out the "V-Plan" three-year restructuring program.

Of the total, restructuring of U.S. business operations will account for Y91.0 billion. That is mostly to account for the cost to reduce the capacity of the Indiana plant.

Isuzu's portion of the Indiana plant's capacity is currently 130,000 units a year, but that's considerably more than the company needs, Ida said.

An early retirement program, which will help Isuzu reduce its parent-company staff to 8,700 by March 2004, will account for Y22.0 billion of the total special loss, while the withdrawal from the recreational vehicle business in Japan will account for Y3.0 billion.

The company expects those expensive restructuring measures to pay off next fiscal year and after, boosting profit by about Y60 billion each year. U.S. business operations could be back in the black on an operating basis as early as the second half of the current fiscal year, Ida said.

Isuzu expects a group net profit of Y50.0 billion or more and a group operating profit of over Y60.0 billion on group sales of Y1.27 trillion in the fiscal year ending March 2005.

Interest-bearing debt will total Y450 billion at the end of March 2005, down from an estimated Y560 billion two years earlier. Total assets will amount to Y940 billion at the end of March 2005, down from estimated Y1.01 trillion in March 2003.

Executives dispatched from GM and Isuzu's main lender/shareholder Mizuho Corporate Bank will help the truckmaker complete the new business plan, Ida said.

"We've failed to meet targets under our two previous business plans and so invited people from GM and Mizuho to support us on this plan," the Isuzu president said.

GM Asia-Pacific Vice President Basil Drossos and Mizuho Corporate Bank Managing Executive Officer Shigeki Toma will become Isuzu's executive vice presidents.