Say It Aint So Joe - Isuzu Shares Now Below 100 Yen

TOKYO, Nov 28 Reuters reported that shares in Japan's Isuzu Motors Ltd closed under the symbolic 100 yen level for the first time on Wednesday on worries over whether its banks and main shareholder General Motors Corp would continue their support.

The troubled truckmaker's stock closed down 3.96 percent or four yen at 97 yen, a level hit earlier this month but only on an intraday basis.

A fall below 100 yen is regarded in the Japanese market as sending a warning signal about the future of a company, although more and more stocks have fallen through the level recently as Japan's economy slumps.

``They have definitely become one of the danger companies,'' they quoted Clive Wiggins, auto analyst at Commerz Securities. "Whether Isuzu stands or falls is largely the decision of the banks and

Gm."

I the story they went on to state that Isuzu, owned 49 percent by GM, said this week it would post a net loss of 25 billion yen ($201.9 million) in the current business year to March and would slash 3,300 jobs by March 2004 on top of 9,700 announced previously.

Hit by a stagnant domestic truck market and sluggish sales of its sports-utility vehicle in the United States, this would be its third year of red ink.

Isuzu's corporate bonds are trading at a steep discount.

The truckmaker's 24th 3.0 percent five-year straight bonds were priced at 79.08 yen per 100 yen face value, according to a standard bond quotation released by the Japan Securities Dealers Association on Tuesday.

But Isuzu President Yoshinori Ida said the company had the support of both GM and its main bank, Dai-ichi Kangyo Bank, part of the Mizuho Holdings Inc group.

Analysts said it was likely not a coincidence that the fall below 100 yen came on the day heavy machinery maker Niigata Engineering Co Ltd filed for court protection.

``The market is overreacting,'' said Stephen Usher, auto analyst at JP Morgan. "I really think it's highly unlikely the company will go bust.

``There is no question the company is under stress, but it is reacting aggressively to that stress.''

Usher noted that the truckmaker had posted an operating profit in the April-September period. He also noted its long-term potential to expand in China and its position in the GM group as the auto giant's diesel engine specialist.

Measures taken by Isuzu include the closure of its Kawasaki plant and the sale of its headquarters building. It has also pledged to cut fixed costs at its North American operations, which have shown operating losses for the past two years.

But GM has said there were limits to its support.

GM CEO Rick Wagoner said last month that while the U.S. auto giant would pitch in where it could with management help and through joint purchasing, it did not intend to set itself up as the financial provider of last resort for its Japanese partners.

GM also has 20 percent stakes in minivehicle maker Suzuki Motor Corp and Subaru-brand maker Fuji Heavy Industries Ltd .

GM has said it had no plans to either raise or lower its stake in Isuzu.

Earlier this year it took a $133 million charge against its holding, effectively writing off its investment so it would no longer record any losses from Isuzu.

In falling below 100 yen, Isuzu joins rival Nissan Diesel Motor Co Ltd , which slid below that level two years ago. It has since traded between 73 yen and 194 yen.

At 97 yen, Isuzu's Wednesday' close was one yen below that of debt-ridden Nissan Diesel -- a position analysts called ridiculous given the two companies' respective debt levels.

Isuzu had 818 billion yen in group interest bearing debt at the end of September, around 11 times equity. That compares with Nissan Diesel's group debt of 420 billion yen, 88 times equity.

All Japanese truckmakers have been hit by the Asian economic downturn and stagnant domestic demand for medium to heavy trucks, now at roughly 80,000 units per year, or about half of peak levels in 1990.

With their weak customer bases, Isuzu and Nissan Diesel have been hit harder than rivals Mitsubishi Motors Corp and Hino Motors Ltd .

($1 equals 123.85 Yen)