Japan automakers, except Nissan, see surge in Q1

TOKYO -- Most Japanese car makers are seen reporting heady growth in quarterly profits as rising overseas sales and a softer yen offset higher research and expansion costs, kicking off another year of record earnings for many.

But Nissan Motor Co., in the middle of a dry spell for new model launches, will be the odd one out as it feels the pinch of slumping output and sales around the world.

While rivals look set to post double-digit growth in first-quarter operating profit, Nissan, Japan's second-largest car maker, is projected to suffer a 14.5 percent decline, according to a survey of six brokerages by Reuters Estimates.

Chief Executive Carlos Ghosn has warned that profits would continue to decline through the first six months, but has promised a comeback in the latter half with the launch of key new models in the United States, its biggest profit source.

Analysts are cautious, however, as Nissan's stock of unsold vehicles grows, pushing up spending on sales incentives.

"We remain concerned with U.S. inventory levels of light trucks, and the implications for second-quarter production and sales expenses," Macquarie Research analyst Kurt Sanger said.

Meanwhile, Toyota Motor Corp. and Honda Motor Co. have shot ahead even as the overall U.S. market eased by 5 percent, as buyers flocked to their sedans, crossovers and other fuel-efficient cars despite reduced sales incentives.

"We think that fortunes will be divided sharply (in the United States), with Toyota, Honda and Mazda Motor Corp. enjoying stable margin expansion while Nissan and Fuji Heavy Industries Ltd. ail in step with the U.S. Detroit 3," JP Morgan analyst Takaki Nakanishi wrote in a report on Friday.

High gasoline prices have hit Detroit's big home brands, which have relied heavily on large sport utility vehicles and pickups for the lion's share of their earnings.

That, coupled with charges for employee buyouts, led to a surprise loss reported on Thursday at number-two U.S. auto maker Ford Motor Co., for the latest quarter.

Consensus estimates have Toyota, Japan's top car maker, booking a 21 percent rise in the April-June first quarter, even as its capital expenditures balloon to build more manufacturing facilities around the world.

Third-ranked Honda is expected to post a 15 percent rise, driven by brisk sales of the new Civic.

Nissan will lead off the earnings season for Japan's auto sector next Tuesday.

WEAK YEN TO OFFSET JAPAN SLIDE

In contrast to the healthy sales growth overseas, most brands have been hit at home with a shift in consumer preference to tiny 660cc cars -- a trend that is favouring top minivehicle makers Suzuki Motor Corp. and Daihatsu Motor Co.

During the latest quarter, demand for minicars grew 5.2 percent in Japan, while the rest of the market contracted 7.3 percent.

Still, with most top car makers making most of their profits abroad, the favorable swing in exchange rates should more than make up for weakness in the Japanese market.

The yen averaged around 114 yen to the dollar and 144 to the euro in April-June, compared with 108 yen and 135 yen a year earlier. The Canadian dollar also strengthened, by a hefty 18 percent, against the Japanese currency.

Mazda, which relies especially heavily on exports, is seen posting a 37 percent jump in operating profit, also lifted by easy comparisons from the year before. A brisk start for the CX-7 crossover in the United States and the continued popularity of the Mazda3 compact worldwide are also helping, analysts said.

Suzuki Motor, known for its cost-cutting expertise, is seen reporting a 22 percent rise as it enjoys brisk business at its Indian unit, Maruti Udyog Ltd., as well as robust sales in North America and Europe.

0

Shares

ATTENTION COMMENTERS: Over the last few months, Automotive News has monitored a significant increase in the number of personal attacks and abusive comments on our site. We encourage our readers to voice their opinions and argue their points. We expect disagreement. We do not expect our readers to turn on each other. We will be aggressively deleting all comments that personally attack another poster, or an article author, even if the comment is otherwise a well-argued observation. If we see repeated behavior, we will ban the commenter. Please help us maintain a civil level of discourse.

Newsletters