TOKYO - Despite mounting pressure from its dominant shareholder, General Motors, Isuzu Motors Ltd. has no plans to accelerate the pace of a restructuring program it laid out in November.
A spokesman said last week the plan, which projects a return to profitability in the fiscal year beginning April 1 after two years of losses, is on track to yield the promised results. The plan calls for expanding Isuzu's diesel engine business, adding a new sport-utility to the U.S. market and slashing procurement costs by 30 percent during the next two years.
But in an unusual public scolding, GM made it clear that it's running out of patience with its 49-percent-owned affiliate. Speaking to analysts Feb. 22, the head of GM's Asia-Pacific operations, Rudy Schlais, said Isuzu needs to take 'radical' action to return to profitability.
'Clearly, Isuzu must consider immediately exiting models and businesses that are unprofitable and which do not appear likely to return to profitability in the very near future,' Schlais said.
GM said it lost $97 million in the fourth quarter from its share of Isuzu's losses.
Schlais' remarks found support among analysts in Tokyo last week, many of whom agree that Isuzu needs to take a more radical approach to restructuring. Their suggestion: Get out of the sport-utility business and focus on diesel engines and heavy trucks.
'In the end, Isuzu should focus on engines,' said Masahiro Yamaki, an analyst at Quick Business Research Institute in Tokyo.
For the fiscal first half ended Sept. 30, 2000, Isuzu lost $22 million on sport-utilities. That was half of its entire loss from North America, as it built up a whopping five-month inventory despite the then-booming U.S. market.
The company is confident, however, that it will turn the money-losing business around in the next fiscal year by rolling out new models. The first is the Axiom, powered by a 3.5-liter engine, which debuts in North America in April.
Isuzu expects to sell 2,000 Axioms a month, planning to push up total sales of its sport-utilities, including other models, by 15 percent to 112,600 in North America this year.
One silver lining for Isuzu is diesel engines. Isuzu aims to transform its U.S. diesel engine plant, DMAX Ltd., in Moraine, Ohio, from an unprofitable startup into a money generator this year. It expects the joint venture with GM, which lost $22 million in the six months ended Sept. 30, to move into the black as DMAX ramps up toward full capacity.
Production of the plant's 6.6-liter diesel engines will be increased to 90,000 this year and to full capacity of 200,000 next year. Its wholly owned subsidiary in Poland, Isuzu Motors Polska, plans to boost output this year by more than 70 percent to 270,000 units, close to the plant's maximum capacity of 300,000.
With the new ventures, Isuzu expects to be building 1.8 million diesel engines a year by 2005, roughly triple the 614,168 units it built in the last fiscal year.