TOKYO -- Japanese truck maker Isuzu Motors Ltd. posted strong half-year results on Thursday and unveiled plans to expand its overseas sales and engine business as it gained support from two trading houses.
Isuzu has also asked General Motors, its main shareholder with a 9 percent stake, to invest more in it.
"We have asked GM to reinvest," Isuzu President Yoshinori Ida told a news conference.
He said, however, that Isuzu had not asked for a specific sum and he did not know when the U.S. auto giant, which once owned 49 percent of the truck maker, would reply.
Isuzu said its first-half profit was much better than expected thanks to brisk sales in southeast Asia and it jacked up its full-year operating profit forecast by 23 percent to a record 86 billion yen ($827 million) from an earlier estimate.
Financial goals in Isuzu's previous business plan are now in sight, allowing it to map out aggressive investment to double its overseas commercial vehicle sales, push its diesel engine business into new markets and cut costs by 20 percent over the next three years.
"In order to survive as costs to meet environmental standards increase, we have to secure more volume on a global basis," Ida said.
The truck maker aims to achieve an operating profit of 100 billion yen in the year to March 2008, a 16 percent increase on this year's forecast.
"I think the 100 billion yen operating profit target is achievable, and in fact they should probably aim to do more," said Mitsubishi Securities auto analyst Shotaro Noguchi.
"There's more potential for growth going forward, especially as it has a strong base in overseas operations."
TRADING HOUSE SUPPORT
Trading firms Mitsubishi Corp. and Itochu Corp., which have joint ventures with Isuzu, said they would buy preferred shares that Isuzu had issued to banks as part of a 100 billion yen debt-for-equity swap in 2002.
Mitsubishi Corp., Japan's largest trading house, will buy 11.75 million preferred shares with a face value of 9.4 billion yen and Itochu will buy about 8.23 million shares with a face value of 6.6 billion yen.
The trading companies declined to reveal how much they would pay for the shares, but an industry source said the Mitsubishi deal was valued at just under 30 billion yen.
Isuzu said it also planned to buy and cancel 37.5 million other preferred shares, reducing its capital by 60 billion yen to 18 billion.
Both measures are aimed at preventing share dilution as the preferred shares can be converted into common stock.
"Isuzu is a partner in the pickup truck business in Thailand and an important client," said Mitsubishi Corp., whose auto-related businesses are a big contributor to earnings.
Mitsubishi said it could become Isuzu's top shareholder if the shares it buys are converted into common stock when that becomes possible from October 2006, but the trading houses said no decision had been made on conversion.
Over the next three years, Isuzu aims to double its overseas commercial vehicle sales to 300,000 units, which it hopes will offset an expected sharp drop in the shrinking domestic market.
Expanding its directly controlled sales networks beyond Japan and North America with the help of Mitsubishi and Itochu, it is targeting a near tripling of sales in China to 100,000 units, a doubling of sales in southeast Asia to 50,000 as well as an increase of two-thirds in North America to 50,000.
In China, where it wants to expand its manufacturing capabilities, it is talking to a potential new partner. It also plans to transfer its light commercial vehicle engineering facilities to Thailand.
Ida said the truck maker wanted to sell its diesel engines more within the GM group and to other auto makers.
"We are pursuing this and have had quite a good response," he said, adding that he expected the use of diesel engines to spread widely as they have done in Europe. Cost cuts will come from a shrinking of platforms and further shifts to common parts.
Isuzu will also put 50 billion yen of its reserves towards reducing accumulated losses -- which totalled 56.22 billion yen in September -- and work towards resuming dividend payments.