Struggling automaker Isuzu Motors Ltd. said Friday it will pull the plug on its unprofitable sport utility vehicle joint venture in the United States with Fuji Heavy Industries Ltd.
The move, part of a three-year management plan, will make Isuzu the first Japanese automaker to withdraw from auto production in the U.S.
Subaru-Isuzu Automotive Inc. will become a wholly owned subsidiary of Fuji Heavy on Jan. 1, Isuzu said, adding it will farm out SUV production to SIA.
SIA, founded in 1987 and based in Indiana, is currently owned 49 percent by Isuzu and 51 percent by Fuji, the maker of Subaru cars.
The three-year plan through fiscal 2004 also features financial support from General Motors Corp. of the U.S., Isuzu’s largest shareholder.
GM will write off its entire stake of more than 48 percent, totaling some 619 million shares, in mid-December before injecting about 10 billion yen to recapitalize Isuzu through the purchase of new shares.
While the move will see GM’s stake in Isuzu decline to 12 percent, it will remain the Japanese automaker’s largest shareholder.
Under the new management plan, Isuzu’s five major creditor banks, including Mizuho Corporate Bank, will carry out a debt-for-equity swap on a total of 100 billion yen owed by the automaker. The deal will increase Isuzu’s capital and capital reserves by 50 billion yen each.
Isuzu will also withdraw 78.6 billion yen from capital reserves and 9.6 billion yen from revenue reserves, although details of the transaction have yet to be announced.
Among other moves in the three-year plan, Isuzu will procure SUVs from GM under its own brand and reinforce its tieup with the firm in the diesel engine business.
Isuzu said it will be able to reduce its parent-only workforce to 8,700 in March 2004 as envisaged in the new management plan, as 4,266 jobs cut in an early retirement program at the end of this month will bring the number of employees to 9,200.
Isuzu revised its group earnings outlook for this fiscal year to a net loss of 170 billion yen — a turnaround from a profit of 3 billion yen in its earlier forecast in May — as it will book an extraordinary loss of 141 billion yen linked to the restructuring of its operations in North America as well as personnel cuts.
The revised forecast also includes a pretax loss of 7 billion yen and sales of 1.27 trillion yen, compared with a profit of 11 billion yen and sales of 1.37 trillion yen in the May projection.
Daihatsu earnings fall
Daihatsu Motor Co. said Friday its first-half earnings fell sharply, due partly to a substantial decline in its domestic sales of minivehicles.
In its consolidated earnings report, the Toyota Motor Corp. subsidiary said it posted a net profit of 1.29 billion yen in the period through Sept. 30, down 75.7 percent from a year earlier.
It logged a pretax profit of 5.80 billion yen, down 37 percent, on sales of 455.70 billion yen, down 4.2 percent.
Group net profit per share stood at 3.1 yen in the half-year period, down from 12.37 yen in the first half of 2001.
The Osaka-based automaker said it will pay an interim dividend of 2.5 yen per share, down from the 3 yen it paid a year ago.
For the full year through March 31, Daihatsu expects to generate a group net profit of 6.5 billion yen and a group pretax profit of 16 billion yen on group sales of 950 billion yen.
In 2001, the company logged a group net profit of 9.31 billion yen and a group pretax profit of 16.13 billion yen on group sales of 943.94 billion yen.