January 16, 2009 / 8:53 AM / 10 years ago

WRAPUP 3-Automakers ax production as global outlook darkens

* Toyota to cut output at North American plants

* Honda to cut domestic production by further 56,000 units

* Subaru maker now sees 08/09 loss

* EU warns not all carmakers may survive ‘brutal’ 2009

* U.S. loans $1.5 bln to Chrysler Financial (Adds Chrysler loan, Ford cuts)

By Helen Massy-Beresford and John Crawley

PARIS/WASHINGTON, Jan 16 (Reuters) - The global chorus of bad news for automakers grew in volume on Friday as manufacturers in Japan, Europe and the United States all warned their businesses continue to struggle and their outlooks were uncertain.

The litany of bad tidings started in Asia on Friday when Honda (7267.T) joined fellow Japanese carmaker Toyota (7203.T) in further cutting output. A European official then warned that some of the region’s manufacturers might not survive a “brutal” 2009.

Then the U.S. government said it would give embattled Chrysler’s financial arm a $1.5 billion loan and said it was also speaking with Ford Motor Co (F.N) on its financing needs.

Honda said it will scale back domestic output hours after Toyota announced new production cuts of its own at its North American plants, while Nissan (7201.T) was seen shifting some Japanese assembly lines abroad to cut costs.

As EU business ministers gathered in Brussels to discuss support for the flagging industry and French manufacturers prepared to lobby their government for aid, European Union industry commissioner Guenter Verheugen said some carmakers faced an uncertain future.

“There is no guarantee that all the main European manufacturers can survive the crisis,” he told BBC radio.

Verheugen forecast a further 20 percent drop in sales in 2009 and said the industry’s outlook was “to say the least, brutal” as cash-strapped consumers hit by the credit crunch and a deteriorating economic climate continue to defer big-ticket purchases. [ID:nLG447167]

In Asia, Subaru maker Fuji Heavy (7270.T) became the latest auto firm to forecast losses this fiscal year as the spreading global recession dampens demand in mature markets and puts the brakes on sales in emerging ones.

News of Toyota’s cuts in North America followed General Motors’ (GM.N) warning that its U.S. auto sales would this year sink to a 27-year low. [ID:nN15534921]

Toyota, which expects to post its first ever annual operating loss, said its inventory of North American-built vehicles was 80-90 days, having doubled in the past year. It hopes to cut that by half in the second quarter. [ID:nN151555]

The world’s No. 1 automaker had already cut North American production and suspended work on a new plant in Mississippi that was due to produce the Prius hybrid from 2010.

“The current inventory level is a record high for Toyota,” said Okasan Securities analyst Yasuaki Iwamoto. “Sales are falling 30-40 percent every month, and this pace of fall is unheard of ... Automakers have to cope with it through production cuts as quickly as possible.”


Honda said it would reduce domestic output by an additional 56,000 units, after Nissan announced further cuts in Japan on Thursday. [ID:nT227889]

The Nikkei newspaper reported on Friday that Nissan was aiming to cut production costs by 30 percent by making its March subcompact in Thailand instead of Japan. [ID:nN15531438]

Fuji Heavy, in which Toyota has a 16.5 percent stake, also said it would consider buying more parts from overseas and might transfer some production offshore.

It now expects an operating loss in the year to March, and cut its global sales target by 10 percent. [ID:nTKB003254]

The picture is bleak in Europe, too, with ministers meeting in Brussels on Friday to discuss support for the industry after the region posted a 17.8 percent drop in sales in December and the steepest full-year drop for 15 years. [ID:nLF98010]

France has already introduced a scrapping incentive for consumers trading in old cars, and made available 1 billion euros ($1.33 billion) in guarantees for the financing arms of PSA Peugeot Citroen (PEUP.PA) and Renault (RENA.PA).


The U.S. Treasury said it will lend $1.5 billion to Chrysler’s finance arm to help it make new car loans as part of a broader program to revive the sputtering industry.

The Treasury said it will make the five-year loan from its $700 billion financial bailout fund to a special unit created by Chrysler Financial at an interest rate one percentage point above the London interbank offered rate (LIBOR) for the first year, then rising to 1.5 percentage points above LIBOR.

The government is bolstering the finance companies to spur auto loans to consumers, most of whom finance auto purchases.

Chrysler, owned by private equity firm Cerberus Capital Management [CBS.UL], is considered the weakest of the Detroit manufacturers and analysts have questioned whether it can survive without a merger partner.

For Ford’s part, it is also in talks with the U.S. government about the automaker’s financing needs, according to a U.S. Treasury official. [ID:nWEQ000597] (For FACTBOXES on the auto industry and aid packages see [ID:nLF719480], [ID:nLF716372], [ID:nLF144921]) (Additional reporting by Sachi Izumi, Kevin Krolicki, David Lawder, Nichola Groom, Cheon Jong-woo, Yumiko Nishitani, Marcin Grajewski and Adrian Croft; Writing by Patrick Fitzgibbons; Editing by John Stonestreet) ($1=.7543 Euro)

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