Automotive News - March 9, 2009 - (Page 25) FEBRUARY 9, 2009 • 25 Tumbling profits whack r&d spending in Japan Hans Greimel hgreimel@crain.com R&d spending falls Japan’s automakers are cutting r&d investments as the losses pile higher. Here’s a look at the difference between this year’s r&d budget forecast and last year’s actual. FISCAL YEAR FORECAST CHANGE As losses mount, Toyota cuts costs Hans Greimel hgreimel@crain.com TOKYO — The global economic meltdown is doing more than fueling unprecedented losses at Japan’s automakers. It’s also whacking their cherished r&d budgets. Reeling from disastrous October-December earnings, Toyota Motor Corp., Mazda Motor Corp., Mitsubishi Motors Corp. and Subaru are all slashing r&d spending. The cuts come as Japan’s automakers idle factories and trim jobs to match plunging demand. Of Japan’s six major automakers, only Honda and Suzuki Motor Corp. say they can deliver a profit, however meager, for the fiscal year ending March 31. The rest are staring at losses. In this atmosphere, cost cutting is king, and higher r&d expenses are on the chopping block. “They’re saying, ‘We’ve got lots of good ideas, but let’s wait,’ ” says Chris Richter, an auto analyst at CLSA Asia-Pacific Markets. This year, Mitsubishi will rein in r&d spending by 13.7 percent to ¥67.0 billion ($736.3 million), while Mazda cuts back by 11.7 percent to $1.11 billion. Fuji Heavy Industries Ltd., maker of Subaru brand cars, joins the club with a 7.7 percent decrease to $527.5 million. Toyota — whose r&d budget is bigger than Mazda’s, Mitsubishi’s, Subaru’s and Honda’s combined — is dialing down spending this year by 4.1 percent to $10.11 billion. The r&d figures include spending on technology and new products. They do not include general capital spending, such as equipping a factory. Honda is actually increasing r&d spending, although not by as much as originally outlined. Last month, Honda reduced its planned r&d budget by Mitsubishi Mazda Subaru Toyota Honda Suzuki $736.3 million $1.11 billion $527.5 million $10.11 billion $6.54 billion $1.32 billion –13.7% –11.7% –7.7% –4.1% +1.2% +10.4% A grim forecast gets worse Source: Company earnings reports Honda’s Koichi Kondo: “In this environment, we can’t afford to increase capital outlays by 20 to 30 billion yen every year.” $54.9 million, to $6.54 billion. The new earmark represents a 1.2 percent increase over last year. “In this environment, we can’t afford to increase capital outlays by 20 to 30 billion yen every year,” Executive Vice President Koichi Kondo said while announcing Honda’s earnings on Jan. 30. Suzuki is the other company pumping money into the product pipeline. The automaker wants to boost r&d spending by 10.4 percent to $1.32 billion. But that, too, is below Suzuki’s earlier, more optimistic target of $1.43 billion. Details are scant about what programs are getting the ax. But sports and performance programs seem high on the list. Honda is quitting Formula One, and Mitsubishi is pulling out of the Dakar Rally, which it has won 12 times. One research area that will likely prevail is the development of green-car technology. With more stringent government guidelines on fuel efficiency and carbon emissions in the United States, Europe and Japan, carmakers have little choice but to invest in improvements. c TOKYO — A torrent of Toyota tripled its loss forecast as North American red ink in North America operations plunged further into the red. and Europe has forced NEW FORECAST FORECAST MADE the once-mighty Toyota FOR FISCAL YEAR IN DECEMBER profit machine to triple Operating profits –$4.95 billion –$1.65 billion its loss forecast for the Net income –$3.85 billion $549.5 million current fiscal year and Sales 7.32 million units 7.54 million units seek sweeping cost cuts of $5.5 billion. Source: Toyota Executive Vice President Mitsuo Kinoshita said last week that first operating loss in seven decades. Toyota will try to bring down fixed costs Global sales for the fiscal year now are by 10 percent. seen tumbling 17.9 percent to 7.32 milKey to this will be freezing plans to build lion units. That’s down from December’s plants and expand production capacity forecast of 7.54 million vehicles and last globally, including China, India and fiscal year’s total of 8.9 million. Brazil. Toyota also will book its first annual net The company already has said that a loss since 1950 — $3.85 billion. That conplan to start production in late 2010 at a trasts with last year’s $18.90 billion net Prius factory in Mississippi is on hold. profit. Toyota also will cut spending on marToyota’s results are getting hammered keting and r&d. The goal is to chop $5.49 by plunging business in the United billion (¥500 billion) in costs, Kinoshita States, where industry sales rates reached said. quarter-century lows at the end of 2008. Toyota also may cut jobs, but Kinoshita Meanwhile, the yen’s rapid surge against said no involuntary layoffs will be made. a weakening dollar lopped billions more Last month, Japan’s Nikkei newspaper off the company’s profits. reported that Toyota was considering the Toyota’s rush to expand North Amerielimination of 1,000 jobs in North Ameri- can output, by opening new plants such ca and Britain. Said Kinoshita: “Outside as its Tundra pickup factory in San Antoof Japan, we intend to make every possi- nio, only added to its crisis of overcapacible effort to protect the jobs of our em- ty. ployees.” “As the business expanded, there may The world’s biggest automaker now is be certain issues we didn’t pay enough atbracing for an operating loss of ¥450 bil- tention to,” Kinoshita said. lion ($4.95 billion) in the fiscal year endIn the October-December fiscal third ing March 31, the company warned on quarter, operating losses in North AmeriFriday, Feb. 6, while announcing third- ca swelled to $1.40 billion. Just a year earquarter numbers. lier, the region reported an operating The result will be Toyota Motor Corp.’s profit of $984.6 million. c NISSAN Business was third to try to profit at site continued from Page 4 ders. “I really don’t know.” The partners allege in their lawsuit that Nissan solicited them to take over the Nissan store from Asbury Automotive Group in 2006, assuring Family it could turn the store into a moneymaker. Family executives believed the store would enjoy business synergies with the neighboring Honda store. would not be accepted. For months, Mach 1’s partners remained under the impression that their proposal was under consideration. Reached by phone, Mach 1 partner Guillermo Hysaw confirms he met with Dixon and Nissan zone management and submitted a package to buy the store. Mach 1 never received a response from Nissan, Hysaw says. A store’s demise Allegations made in a dealer’s lawsuit against Nissan North America Jan. 2006: Family Automotive takes over a troubled Nissan dealership near its Honda dealership in Orange County, Calif. Jan. 2008: Family Nissan loses money; by March, losses hit $200,000 a month. March 2008: Nissan directs Family to invest $2 million in the store; Family does not comply. March 2008: On assurances that Nissan Motor Acceptance will invest $2 million, Family invests $700,000; Nissan does not invest. May 2008: Family Nissan closes. Aug. 2008: Nissan rejects an interested buyer for the store. not, why is the store still sitting empty? “I don’t have the answers,” he says. Mach 1 is no longer pursuing the Nissan store but instead has submitted a proposal to buy Family’s neighboring Honda store. Dixon maintained his office in the Nissan store through December. The Nissan store now sits empty and its signs have been removed. Hysaw speculates that Nissan will never reopen the Rancho Santo Margarita point. c ‘Serious questions’ Dixon’s lawsuit says that Nissan’s refusal to live up to its promises, and its refusal to consider Mach 1, causes him to “have serious questions about the motives” of Nissan. Nissan officials declined to discuss the pending litigation. But a spokeswoman at the Franklin, Tenn., automaker provided a prepared statement saying, “The continued operation of this location was a matter of financing and capital and had nothing to do with minority status.” One source familiar with the situation, who declined to be identified, believes Nissan had overestimated the sales potential of the Rancho Santa Margarita market. If so, that would mean the store perennially would fall short of Nissan’s sales expectations. But Dixon can’t help wondering: Did Nissan simply want him out of the location? And why did Nissan allegedly fail to respond to Mach 1? Did Nissan want everyone out of the point? Was there something inherently wrong with the point? And, if Hometown advantage At the time of the buyout, Spizzirri told the press that as local businessmen, he and Dixon had a hometown advantage over the national Asbury chain. They would be the third dealership group to try to make the store profitable. But according to their lawsuit, Family was losing $200,000 a month by early 2008 on the former Asbury store. The store was not living up to its expected sales and profit potential, and the market was entering a downturn. Dixon alleges in his suit that last March Nissan demanded he put $2 million of new capital into the store — and gave him only a few days to come up with the money. When he failed, according to the complaint, representatives of Nissan Motor Ac- TIM RUE Ray Dixon at his closed former dealership: “I don’t have the answers.” ceptance Corp. told him that if he invested $700,000 in the store, the factory finance arm would put in the $2 million. Dixon says he invested the $700,000, but says Nissan did an about-face and refused to provide the $2 million. He says the automaker refused to discuss its change of plans. Dixon also alleges that, even as he struggled to recapitalize the store, he discovered Nissan was approaching other dealership groups to take over the point. The lawsuit says Nissan denied it approached other groups. The suit further alleges th
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