News and Finance

Japan’s Mazda Motor Corp and Mitsubishi Motors Corp warned on Wednesday they would lose money this year as they build fewer cars in view of tumbling demand, joining a growing list of automakers awash in red ink.

The revisions had been expected after bigger rivals Toyota Motor Corp and Honda Motor Co slashed their forecasts in the past few weeks, also citing pressure from the yen’s steep rise.

Carmakers everywhere are idling factories, slowing assembly lines and shedding workers to prevent a costly further buildup of inventory. But with sales continuing to tumble — the U.S. market hit a 27-year low in January — low output levels are set to persist well past the business year ending on March 31.

Mazda, Japan’s fifth-biggest automaker and owned 13 percent by Ford Motor Co, now expects an operating loss of 25 billion yen ($279 million) in the year ending March 31, instead of a 90 billion yen profit. The new projection was worse than the lowest forecast for a 19 billion yen loss in a survey of 15 analysts by Reuters Estimates.

Mazda, which is especially vulnerable to a strong yen due to its high rate of exports, sees a net loss of 13 billion yen instead of a profit of 50 billion yen for the year.

For the October-December third quarter it had an operating loss of 24.2 billion yen, against a profit of 35.3 billion yen a year earlier. Revenue slid 40 percent to 512.4 billion yen.

Mazda said it would cut production by a further 48,000 units this business year, bringing the net reduction to 18 percent from initial plans, and predicted the low output levels would continue through the April-June quarter cash advance loan.

“It’s going to take some time to adjust inventory,” Chief Executive Takashi Yamanouchi told a news conference.

“I expect production levels will stay extremely difficult in the (April-June) first quarter of the next term.”

NEW RACE: COST-CUTTING

Sixth-ranked Mitsubishi Motors forecast a net loss of 60 billion yen — three times the amount reported by the Nikkei business daily this week — and operating profit of 5 billion yen for 2008/09. In late October, it had forecast a net profit of 20 billion yen and an operating profit of 50 billion yen.

Mitsubishi Motors plans to build 330,000 fewer vehicles this business year than it had initially planned — roughly equivalent to a third of its sales volume forecast.

“It’s going to take a few months to bring inventory levels down to appropriate levels,” Mitsubishi Motors President Osamu Masuko told reporters, saying the plunge in sales since November has been “practically vertical.”

For the October-December third quarter, Mitsubishi Motors had an operating loss of 5.5 billion yen, swinging from a profit of 33.1 billion yen a year earlier.

With no demand recovery in sight, automakers are scrambling to reduce fixed costs to stop the losses. Mazda said last month it would cut salaries for white-collar workers in Japan, with non-factory workers taking two days off every month on reduced pay. 

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