Maruti may consider production cut if demand remains sluggish
24 Dec 2008;timesofindia.indiatimes.com:NEW DELHI: The country's largest car maker, Maruti Suzuki, on Wednesday said it may consider production cut if the market does not improve. The company, which has been negotiating contract manufacturing deal for its A-Star model with Nissan, also expects to start exports for the Japanese car maker by around February-March next year.
Maruti Suzuki India Managing Director Shinzo Nakanishi said that across the world there has been a slowdown in demand, including China, India and other BRIC countries.
"I hope not but if we are obliged then we will do it," he told reporters here when asked if the company would go for a production cut.
On the company's planned export of the A-Star for Nissan, an agreement on the volume has not been signed as yet but shipment to Europe is "expected by about February-March next year," he said.
"Our focus is on the network stocks. If the network stock is overflowing, then the company would take appropriate measure," he added.
In the April-November period, the company's sales growth witnessed a negative growth of three per cent compared with the corresponding period last year.
Tata Motors approaches UK govt for loan to save JLR
23 Dec 2008;economictimes.indiatimes.com:Nandini Sen Gupta:NEW DELHI: Tata Motors has approached the British government for a loan to fund the working capital needs of Jaguar Land Rover. According to top source familiar with the situation, Tata Motors has made it clear that it is looking for a loan and not a free lunch from the government of UK. The company is willing to pay interest at market rates for the money.
"The loan request is a stop-gap arrangement because commercial banks have stopped lending altogether," said the top source. "That's what the Society for Motor Manufacturers and Traders (SMMT) is also asking for – either a loan at commercial rates or a loan guarantee to tide over the liquidity crisis."
The request for a government loan has come on top of "financial support" by Tata Motors for JLR's working capital needs. When the two iconic British brands were acquired, the idea was that their balance sheet would pay for their working capital needs.
"But the ongoing slowdown and the liquidity crunch necessitated support from Tata Motors which was given from time to time," said the top source.
Tata Motors raised a $3 billion bridge loan for the acquisition of Jaguar-Land Rover. Of that $2.3 billion was used in the actual acquisition. The balance, has been injected into JLR in the form of working capital support, said the top source. UK media has been speculating about whether the British government would offer a bailout package to JLR a la the Bush package for Detroit.
The latest reports claim that the Tatas have managed to raise some money on the assumption that the government bailout may be likely very soon. Although business minister Peter Mandelson has said that the new owners need to look for funds on their own, British PM Gordon Brown and FM Alistair Darling are in favour of a support package, say media reports. UK's biggest union Unite, which had backed the Tata bid for JLR, is also expecting financial support from the government.
24 Dec 2008;economictimes.indiatimes.com:TOKYO: In more bad news for Toyota, Japan's No. 1 automaker said Wednesday its global vehicle sales plunged 21.8 percent in November, its biggest drop in eight years. The news comes just days after the company predicted that this fiscal year it would report its first operating loss in 70 years. Toyota Motor Corp., running neck-and-neck against industry leader General Motors Corp. in global vehicle sales, sold 618,000 automobiles in November, down 21.8 percent from last November.
That's the biggest year-on-year slide since Toyota began tracking comparable data in January 2000. Such declines never reached 20 percent in the past, the company said. For the January-November period, Toyota sold 8.356 million vehicles around the world. Detroit-based GM has not released such figures.
Japanese automakers, which boast a reputation for fuel-efficient models, had avoided some of the serious problems of their American rivals. But shrinking demand in the U.S. after the financial crisis hit earlier this year has battered their sales and profit. Toyota said Monday that it expects to report an operating loss of 150 billion yen ($1.66 billion) for the fiscal year ending March 2009, its first such annual loss since 1938, the year after the company was founded.
It also lowered its net profit forecast _ which gives a fuller picture by including income taxes and various other expenses _ to just 50 billion yen ($555 million) for the year through March 2009 _ a tiny fraction of the 1.7 trillion yen it earned last year. For nearly a decade, Toyota was steadily on track toward reaching the 10 million vehicles mark in global sales, and readying to dethrone GM from the top position it held for 77 years.
But with the global slump, Toyota has had to lower its sales targets as well. On Monday, it reduced its global vehicles sales target for 2008 again, this time by 4 percent, to 8.96 million. Earlier in the year it had expected to sell 9.85 million vehicles globally.
24 Dec 2008;business-standard.com:Singapore: World oil prices were mixed in Asian trade on Christmas eve today with the current economic gloom weighing down investors' mood, analysts said.
New York's main contract, light sweet crude for February delivery, rose nine cents to $39.07 a barrel after closing 93 cents down at $38.98 in US trade yesterday.
Brent North Sea crude for February delivery fell 6 cents to $40.30. The contract settled yesterday $1.09 lower at $40.36.
Latest US data showing that the world's biggest economy remains mired in a recession is likely to keep crude oil prices under pressure in the immediate term, analysts said.
"It is just more of the same on the economic front," said Jason Feer, Singapore-based vice president with energy market analysts Argus Media. "There is no sign of any economic recovery that will push up oil demand."
US government data released yesterday confirmed the American economy — the world's biggest crude oil consumer — contracted by 0.5% in the third quarter of this year. The contraction was seen as marking the start of a steep downturn for the US after it posted gross domestic product (GDP) growth of 2.8% in the second quarter.
US data also showed new home sales in the crisis-hit property sector plunged in November to their lowest level since January 1991.
Crude prices have sunk more than 70% since hitting a record high over $147 in July amid fears the rapid slow-down of the global economy will hit energy demand.
Traders are awaiting the release today of the US Department of Energy's weekly oil inventory report for clues on US consumer demand.
23 Dec 2008;timesofindia.indiatimes.com:NAGOYA, Japan: Toyota has hit a speedbump. The Japanese auto giant is forecasting its first operating loss in 70 years, more fallout from the severe
slump in vehicle sales that has nearly claimed two Detroit automakers and raised questions over when the US market, Toyota's largest, will hit bottom. Despite the setback, the automaker is still poised to pull ahead of its main US rival, General Motors Corp., to become the No. 1 world carmaker in 2008, industry watchers said. Toyota reported it sold 7.05 million cars worldwide during the first nine months of the year, compared with 6.66 million for GM for the same period.
"They're going to grow and outstrip General Motors, there's no way around that," said George Magliano, analyst with IHS Global Insight.
Toyota Motor Corp., which is committed to zero layoffs, will continue cutting production to weather the downturn. The automaker also lowered its global vehicle sales forecast for the second time this year and said it was putting ambitious expansion plans on hold, in large part because of a precipitous drop in demand in the U.S.
"The tough times are hitting us far faster, wider and deeper than expected," Toyota President Katsuaki Watanabe told a gloomy news conference Monday at the company's Nagoya, Japan, headquarters. "This is an unprecedented crisis requiring urgent action."
The Asahi newspaper reported on Tuesday that Akio Toyoda, the son of former Toyota President Shoichiro Toyoda and the grandson of the company's founder, will replace Watanabe. The report did not give sourcing. Toyota said Tuesday that no decision had been.
For years, Toyoda has been seen as a top candidate for the post. But on Monday Watanabe said the timing was not right to change leadership as Toyota tries to turn itself around.
Toyota had reported strong growth in recent years, boosted by heavy demand for its fuel-efficient models like the Camry sedan and Prius gas-electric hybrid.
But Watanabe said a severe drop in demand, especially in North America, which accounts for one-third of vehicle sales, and profit erosion from a surging yen were too much for Japan's No. 1 automaker. Overall U.S. auto sales fell to their lowest level in 26 years last month.
"The change that has hit the world economy is of a critical scale that comes once in 100 years," Watanabe said.
Toyota said it expects an operating loss of 150 billion yen ($1.66 billion) for the fiscal year ending in March, compared with an operating profit of 2.27 trillion yen ($25.2 billion) a year earlier.
Toyota said it would still post a small net profit of 50 billion yen ($555 million), thanks to outside dividend income, down from year-earlier earnings of 1.7 trillion yen ($18.89 billion). But operating income is seen as the best reflection of its core business.
The announcement Monday reflected a dramatic change of fortune for the iconic company, which in recent years had outlined ambitious expansion plans and weathered an industry slowdown much better than its U.S. rivals.
Toyota, which started in business as a loom maker, began making trucks and passenger cars in 1937. Its first and only operating loss came the following year, before it started reporting formal results in 1941.
In its forecast Monday, Toyota lowered the number of vehicles it expects to sell globally this calendar year to 8.96 million, down 4 percent from last year. Earlier this year, Toyota had projected worldwide sales of 9.5 million vehicles.
Tsuyoshi Mochimaru, auto analyst for Barclays Capital in Tokyo, warned worse may be ahead.
U.S. auto sales aren't expected to start recovering until late 2009, and the dollar -- already at a 13-year low against the yen -- could lag further, he said. A strong yen hurts results because overseas profits must be converted into the Japanese currency.
"The problem is next year," said Mochimaru. "It's unmistakable that things are extremely tough for Toyota."
Watanabe and other Toyota executives repeated a recent announcement that expansion plans will be on hold, including a new plant in Mississippi and projects in India.
Toyota is a relatively old-style Japanese company that offers lifetime employment, and only in recent years has hired and let go of temporary workers to adjust production. It said it was reviewing overseas jobs but had not reached a decision.
The company said it plans to cut the number of temporary workers at its Japanese plants in half to about 3,000, although there were no plans to lay off any full-time employees.
In the U.S., Toyota said it had no intention of drifting from its practice of avoiding layoffs for full-time employees either globally or for its 14 U.S. factories located in the South and Midwest.
This practice has helped the automaker resist unionization at its factories, saving it from the high labor costs plagued its U.S. counterparts, said Erich Merkle, auto analyst with Crowe Horwath LP. That makes any U.S. layoffs in the near future unlikely, he said.
"I think they'll try to ride this thing out the best they can," Merkle said. "You'll see more reduction in terms of plant output and production."
Watanabe vowed Toyota would grow so lean it would realize profitability even if its worldwide sales fall as low as 7 million vehicles.
"We must change to become more slim, muscular and flexible," he said.
The automaker will focus on hybrids and small cars, and invest in environmentally-friendly technology to prepare for long-term growth, officials said.
While Japan's automakers are in far better financial shape than their cash-strapped American counterparts, the global slowdown is hitting them hard. Last week, Japan's No. 2 automaker, Honda Motor Co., also lowered profit and sales forecasts and declined to give a vehicle sales goal for 2009.
Monday marks the second time Toyota reduced its earnings forecast. Initially, it had projected net profit of 1.25 trillion yen ($13.9 billion) for the fiscal year, but last month lowered that to 550 billion yen ($6.1 billion).
Also Monday, it lowered its revenue forecast to 21.5 trillion yen ($239 billion), down about 18 percent from a year earlier.
Toyota's US sales plunged by a third over 2007 in November, when overall sales fell to their lowest level in more than 26 years. And there is little hope for a quick fix as consumers hold back big purchases amid a credit crunch, rising unemployment and fears about the future.
The company's stock fell 5 yen, or 0.17 percent, to 2,895 yen in Tokyo. The benchmark Nikkei 225 stock average rose 1.5 percent.
23 Dec 2008;business-standard.com:Ahmedabad: General Motors India has temporarily closed production at its plant in Halol near Vadodara. The plant has been shut for about a fortnight. However, company officials have maintained that the closure is a routine exercise and is not a fallout of ongoing global meltdown.
“There will be no production at the company’s Halol unit for about two weeks”, said P Balendran, vice-president, GM India. The company has shut production from 13 December to 30 December.
