Isuzu Plans to Cut 3,700 Jobs, Realign Ties With General Motors in Restructuring

TOKYO AP reporting struggling Isuzu Motors plans to reduce its work force by 3,700 people, or about 30 percent, and restructure its partnership with U.S. automaker General Motors Corp. as part of a three-year plan to return to profitability.

The Japanese car and truck maker said Wednesday it expected to make the jobs cuts -- all in Japan -- through early retirements and said it also planned to swap 100 billion yen ($853 million) of debt for equity.

Isuzu said it had received preliminary approval from its main bank Mizuho on the overhaul which it said should make it profitable by March 2005.

For its part, GM said it will spend more than $500 million to help Isuzu with its turnaround.

GM, the world's biggest carmaker, has agreed to return its current 49 percent stake in Isuzu to the Japanese company and said it would pay 10 billion yen ($85 million) for a 12 percent stake in the vehicle maker.

It said that would provide more liquidity to Isuzu to reduce some of its $5.8 billion debt.

In addition, the Detroit-based automaker said it will spend 50 billion yen ($426 million) to acquire a 60 percent interest in Isuzu's diesel engine business in Poland and to boost to 60 percent its 40 percent stake in the Isuzu U.S. diesel engine business.

GM will also acquire a majority interest in a new joint venture with Isuzu to develop diesel engines -- one of Isuzu's strong points.

"The initiatives would provide Isuzu additional liquidity, accelerate Isuzu's recovery and help establish a foundation for their future business structure," said GM group vice president Frederick Henderson.

"For GM, the proposals would allow us to take control of key technologies that are important to GM."

GM will also appoint a senior executive to support Isuzu management, it said. Isuzu also plans to reorganize its sport utility vehicle operations in North America.

Isuzu, based in Tokyo, lost 43 billion yen ($367 million) for the fiscal year ended in March on 1.6 trillion yen ($13.6 billion) in sales as vehicle sales dropped both at home and the United States amid a global economic slowdown.

Cost reduction, including job cuts under an earlier revival plan that began in cooperation with GM, helped it post a smaller loss than a year earlier.

Isuzu hopes to post a profit of at least 50 billion yen ($426 million) on sales totaling 1.3 trillion yen ($11 billion) by March 2005. It also hopes to reduce debt by then to 500 billion yen ($4 billion).

GM said it expects the plan to become final by the end of this year after Isuzu reaches an agreement with its lenders.