Japanese truck makers face difficult future - Asia Report

Automotive Industries,  Nov, 2002  

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Against the backdrop of this year's Tokyo Motor Show, with its upbeat focus on future technologies, Japanese truckmakers face an ominous present.

Based on six-month sales results projected over the full year, demand for trucks (2 tons and over GVW) is on target to drop 10 percent from last year's low level of 176,647 units. In 2001, sales fell 6 percent.

And while demand for medium- and heavy-duty trucks (above 6 tons GVW) held steady at 80,122 units last year, sales in this critical segment were on course halfway through 2002 to fall below 75,000, a mere fraction of the 1990 peak of 193,300.

Analysts see little chance of near-term recovery, leading some to conclude there are too many producers. Considered most vulnerable at this juncture are Isuzu Motors Ltd. and Nissan Diesel Motor Co., the nation's second and fourth largest producers.

In fiscal 2001, Isuzu reported its third consecutive yearly loss: $358 million. As a result, the General Motors Corp. affiliate was forced to sell GM part of its profitable diesel engine operations in the U.S. and Poland, DMAX Inc. and Isuzu Motors Polska Sp.Zo.o, respectively. As part of the deal, Isuzu had to recapitalize with the U.S. automaker reducing its equity stake from 49 percent to 12 percent.

Meanwhile, Nissan Diesel, which eked out a small Y$5.1 million profit--its second since posting a $6 million deficit in fiscal 1999--is considered likely to go back into the red this year. Analysts forecast a $8.3 million loss for the affiliate of Renault S.A. and Nissan Motor Co. due in part to a still-heavy debt load.

Elsewhere, Hino Motors Ltd. reported an $70 million profit, its first since fiscal 1997. The Toyota Motor Corp. subsidiary, having completed the bulk of a comprehensive restructuring initiated several years ago, is projected to match fiscal 2001 results in the current business year with net earnings of $71 million on sales of $6.9 billion, up nine percent over last year's level.

Rounding out the field, Mitsubishi Motor Corp.'s "Fuso" truck and bus unit, also profitable, needs a cash infusion to support future product development. According to Japanese news reports, DaimlerChrysler AG, Mitsubishi's largest shareholder, will extend the operation $667 million in financial aid. Combined with a reported $333 million from Mitsubishi group companies, the total package will amount to $1 billion, If reports are correct, DaimlerChrysler will take a 40 percent equity stake in the truckmaker, to be spun off early next year.

Against this backdrop, new regulations requiring lower particulate emission levels due to come into effect next year have forced domestic truckmakers to invest heavily in improved powertrains.

Compounding problems, utilization rates remain low at an under 20 percent reflecting the slow economy. As a result, nearly 50 percent of large and medium trucks reportedly are being sold below cost and operators are still hesitant to modernize to their aging fleets. At present, average vehicle age has risen to around 12 years. Analysts believe average age could increase to 15 years unless regulations force operators to scrap older models and replace them with new. Given the current state of the economy and reported plans to trim public works spending, they say this is unlikely.

TRUCK SALES BY CLASS

                   1ST HALF 2002  (2002 EST.)  2001     2000

>16 ton (all GVW)  14,150         (28,300)     32,011   33,477
6< to 16 ton       22,111         (44,222)     48,111   46,630
2 to <6 ton        40,976         (81,952)     95,123   160,437
Total              77,457         (154,914)    175,647  186,544 *

TRUCK SALES BY MANUFACTURER

                   1ST HALF 2002  (2002 EST.)  2001     2000

HINO

>16 ton            3,691          (7,382)      8,460    9,386
6< to 16 ton       6,726          (13,452)     13,799   12,846
2 to <6 ton        4,935          (9,870)      10,078   8,070
Total              15,352         (30,704)     32,337   30,302

ISUZU

>16 ton            2,619          (5,238)      6,240    6,852
6< to 16 ton       6,054          (12,108)     13,128   13,121
2 to <6 ton        13,544         (27,088)     30,357   35,920
Total              22,217         (44,434)     49,725   55,893

MITSUBISHI

>16 ton            4,079          (8,158)      9,291    9,562
6< to 16 ton       5,953          (11,906)     14,190   13,656
2 to <6 ton        13,295         (26,590)     29,346   35,290
Total              23,327         (46,654)     52,827   58,508

NISSAN DIESEL

>16 ton            3,547          (7,094)      7,562    7,677
6< to 16 ton       3,350          (6,700)      6,889    6,844
2 to <6 ton        367            (734)        1,203    1,398
Total              7,264          (14,528)     15,654   15,919

NISSAN

>16 ton            0              0            0        0
6< to 16 ton       5              (10)         16       29
2 to <6 ton        1,187          (2,374)      3,210    3,659
Total              1,192          (2,384)      3,226    3,688

MAZDA

>16 ton            0              0            0        0
6< to 16 ton       23             (46)         89       134
2 to <6 ton        2,720          (5,440)      6,719    6,506
Total              2,743          (5,486)      6,808    6,650

TOYOTA

>16 ton            0              0            0        0
6< to 16 ton       0              0            0        0
2 to <6 ton        4,865          (9,730)      13,980   15,331
Total              4,865          (9,730)      13,980   15,331

DAIHATSU

>16 ton            0              0            0        0
6< to 16 ton       0              0            0        0
2 to <6 ton        63             (126)        230      263
Total              63             (126)        230      263

VOLVO TRUCK

>16 ton            220            (440)        402      N.A.
6< to 16 ton       0              0            0        0
2 to <6 ton        0              0            0        0
Total              220            (440)        402      N.A.

MERCEDES-BENZ

>16 ton            214            (428)        458      N.A.
6< to 16 ton       0              0            0        0
2 to <6 ton        0              0            0        0
Total              214            (428)        458      N.A.

* The total does not include import makes.

Source: Isuzu (for all Japanese makes), Volvo Nippon K.K. and
DaimlerChrysler Japan