Isuzu Motors may cut forecasts again, investors say

TOKYO, October 29, 2002; Kae Inque writing for Bloomberg reported that Isuzu Motors Ltd. shares fell 8.5 percent on investor concern the truckmaker may need more help from its owners and creditors only days after securing a 100 billion yen ($801 million) bailout.

The General Motors Corp. affiliate on Friday cut its earnings forecast for this business year to a 170 billion yen loss from an earlier profit prediction. Mizuho Corporate Bank Ltd. and another four banks also agreed to a 100 billion yen debt-for-equity swap on top of a 50 billion yen credit line the company received last year.

"Isuzu needs to strengthen its truck division and possibly come up with another plan" to please investors, said Koichi Seki, an equity manager at Chuo Securities Co. "The company was saved from going down, but it's still opaque how its business can grow."

Isuzu is among Japanese companies that may get less support from banks as the government cracks down on businesses with bad loans. The truckmaker's shares have lost a third of their value since Minister for Financial Services Heizo Takenaka said he will speed up government moves to write off bad loans after his Sept. 30 appointment.

Isuzu shares fell 4 yen to 43 at close of trading in Tokyo at 3 p.m. The stock, which surged 27 percent on Friday before the announcement, has lost 94 percent of its value in the past six years.

The truckmaker will post its fourth straight annual loss as it takes charges in part from pulling out of its U.S. joint plant with Fuji Heavy Industries Ltd. Isuzu has been struggling to return to profit over the past three years as Japanese truck demand falls to record lows. Sales of its sport-utility vehicles in the U.S. plunged 38 percent in the first nine months of 2002, because the company failed to release any new models.

"Isuzu's plan wasn't so clear and didn't explain in detail how it can achieve its goals," said Fumiyuki Nakanishi, a strategist in the investment division at Meiko National Securities Co. "There's a possibility that it could revise down" earnings again, he said.

Isuzu and the banks will decide on final figures at an emergency shareholders' meeting on Nov. 27 where they will also discuss details of the debt-for-equity swap. The move will aid Isuzu's plan to cut debt to 450 billion yen by March 2005 from its current 679 billion yen.

Isuzu expects group sales to drop 7 percent below its previous forecast to 1.27 trillion yen this business year. The company also expects to post a current loss, or pretax loss from operations, of 7 billion yen, reversing its previous profit forecast of 11 billion yen, the company said.

"Isuzu's plan and targets seem very optimistic," said Meiko's Nakanishi. "We can't be sure the company can recover next fiscal year through the restructuring plan."

The maker of Elf trucks said it expects net income of at least 50 billion yen in the year ending March 2005 and operating profit of 60 billion yen in the same period. The company expects sales in that year of 1.27 trillion yen, the same as this business year's forecast.

"Isuzu will remain as a company, but what will happen in the longer run is difficult to predict," Chuo's Seki said.