In a move that has become common as Japanese automaker accountants tally up their third financial quarter results, Suzuki Motor has slashed its annual operating profit forecast by a third. The reasons were familiar, too: falling global car sales and a strong yen.
The revision nonetheless puts Suzuki in a shrinking pool of domestic automakers expected to remain profitable this year, a Reuters report noted. Most have slashed their forecasts since the last quarter to predict losses as vehicle inventory piles up and factories are idled.
However, because it sells half its cars in Japan and India, Suzuki is less vulnerable to the dollar’s fall than its domestic peers, the report said, adding that, though sales in India, Suzuki’s largest market, have been slipping due to scarce financing and a slowing economy, they have not fallen as fast as in the US and Europe.
Suzuki now expects 2008/9 fiscal year operating profit of JPY67bn (US$750m), down from JPY100bn. A survey of 19 brokerages by Reuters Estimates put the consensus forecast at JPY79bn.
Suzuki expects net profit of JPY22bn yen instead of JPY60bn.
“We entered India (in the 1980s) because we didn’t have the right cars to make it in the west,” chief executive Osamu Suzuki told a news conference in Japan.
“That’s paying off now, but the true battle starts here,” he said.
For the October-December quarter, Suzuki posted an operating profit of JPY5.8bn yen, short of market estimates of JPY9bn and the JPY38.3bn it made in the same period a year earlier.
A net loss of JPY12.6bn compared with the JPY21.6bn profit last year. Revenues fell about a quarter to JPY614.9bn.
Suzuki lowered its 2010/11 revenue target, forecast 2008/09 revenue of 3 trillion yen (from 3.2 trillion) and said it would try to become leaner to be able to make money on revenues of just 2.5 trillion yen.
Suzuki was quoted as saying he wanted to avoid falling into the red next business year “using all possible means”, even as analysts expect bigger rivals to widen their losses.
“Once a small company like ours loses money, it can only go downhill,” he said.
Cost reduction measures under way include job cuts world wide and a capacity reduction at the Hungarian car factory.