Isuzu says has GM, DKB's full support

TOKYO, Dec 4 Reuters added additional material to a press release that reported that Isuzu was OK. Moving to soothe nervous investors, Japan's Isuzu Motors Ltd said on Tuesday it had the full support of its main creditor bank and its business partner, adding that recent falls in its share price do not reflect its business performance.

``We have the full support of GM (General Motors Corp and Dai-Ichi Kangyo Bank. Their support of our recovery has not wavered and there is currently no reason for concern,'' president Yoshinori Ida told a news conference.

Shares in Isuzu fell to year-lows of 70 yen before a late rally drove the stock 6.49 percent higher to end at 82 yen. The gains snapped six straight losing sessions, during which the share lost over a quarter of its value. Isuzu shares hit a year-high of 304 yen on May 28.

Some of the selling came on speculation that General Motors would sever ties with Isuzu, which is 49 percent owned by GM, sparked by a Monday sell order placed through Deutsche Securities for the sale of 90 million shares, or seven percent of outstanding shares.

General Motors would be the only shareholder capable of such a large sell order, but Deutsche Securities admitted on Tuesday it placed an erroneous sell order with an incorrect number of shares before the market close on Monday. The order was not executed.

Analysts said it is unlikely GM would end its relationship with Isuzu, since GM has already written down its investment and cannot incur any further losses from Isuzu. Also, Isuzu is a key supplier of diesel engines for GM.

The U.S. auto group issued a separate statement, pledging its support to Isuzu and its restructuring plans.

The volatile trade in Isuzu shares came one week after the company announced it would post a net loss of 25 billion yen ($201.5 million) in the current business year to March and would slash 3,300 jobs by March 2004 on top of 9,700 announced previously.

Isuzu has been hit by stagnant domestic truck market and sluggish sales of its sports utility vehicle in the United States. On Monday, the company said November U.S. sales fell 33.6 percent year-on-year.

THE V-PLAN

Isuzu said it had received a credit line of 50 billion yen until the end of the current business year in March from DKB, a member bank of Mizuho Holdings Inc .

Isuzu introduced a three-year reform plan in May dubbed the ``V-plan'', standing for victory, aimed at shaving 250 billion yen in interest-bearing debt by March 2004. Isuzu's debt stood at 750 billion yen in March.

But shares in Isuzu sank below the symbolic 100 yen level last week on worries over whether it would be able to execute the plan after projecting a third straight year in the red.

``When you look at Isuzu's share price compared to some other share prices and the potential valuations, I think the situation here is overdone,'' said Stephen Usher, auto analyst at JP Morgan.

Usher said much of the selling was speculative based on the erroneous order from Deutsche Securities, driving volumes to its highest levels in more than two years with 22.2 million shares changing hands on Tuesday.

Deutsche Securities became the second foreign brokerage to place an embarrassing mistaken order in recent days.

On Friday, UBS Warburg admitted to placing a mistaken sell order for shares in Dentsu Inc after its debut on the Tokyo Stock Exchange, causing an initial slump in the price.

($1 equals 124.07 Yen)