TOKYO - Time appears to be running out for Nissan Diesel Motor Co.
Starved by Japan's continuing economic weakness and shut out of the partnership between Nissan Motor Co. and Renault SA, the future of the country's smallest maker of medium and heavy trucks looks increasingly uncertain.
The company recently scaled back its debt-reduction targets considerably, signaling a diminished ability to pay down debt, and revised its profit forecast for the fiscal year ended March 31 to a net loss of $419 million, from a previous forecast of a $200 million loss.
The huge loss comes despite an extraordinary gain of $200 million from the sale of land. In the prior fiscal year ended March 31, 1999, Nissan Diesel posted a net loss of $133 million.
Nissan and Renault, which effectively merged in April 1999, each own 22.5 percent of Nissan Diesel, and the truckmaker expected to be helped by the partners. Indeed, Renault quickly agreed to begin sourcing 30,000 small diesel engines a year from Nissan Diesel and distribute two of the truckmaker's light commercial trucks outside of Japan.
But any additional aid seems unlikely. Renault has since agreed to sell its truck unit, Renault Vehicules Industriels, to Sweden's AB Volvo, which already has a partnership with Mitsubishi Motors Corp.'s truck unit.
Mitsubishi will spin off its truck operations into a new outfit, Mitsubishi Fuso Truck & Bus Co., by year end. Volvo will own 19.9 percent of the new company, as well as 5 percent of parent Mitsubishi Motors.
In announcing the Renault-Volvo deal, a senior Renault executive said it would not negatively affect Nissan Diesel. 'I don't see at this stage any reason why already decided projects between RVI and Nissan Diesel should not continue,' said Georges Douin, Renault executive vice president.
But analysts say the Volvo-Renault Vehicules Industriels deal is very bad news for Nissan Diesel.
'Nissan Diesel is not just left out in the cold, it is in the deep freeze,' said Steve Usher, auto analyst for Jardine Fleming Securities (Asia) Ltd. in Tokyo.
Nissan Diesel's five-year restructuring plan reaffirms its goal of cutting costs by Y60 billion - or about $570 million at current exchange rates - over the first three years by purchasing components jointly with Nissan and Renault.
On the other hand, the truckmaker says it will cut group debt, excluding sales financing, to $3.8 billion by the end of March 2005. That debt level would equal half of group sales, Nissan Diesel said.
That is a far less ambitious target than Nissan Diesel set previously.
Last October, the company said it would cut debt from $4.8 billion in March 1999 to $3.8 billion in March 2001. But by the end of March 2000, the debt had only been reduced to $4.6 billion. So now, instead of cutting debt by one-fifth in two years, Nissan Diesel will take six years to do so.
The truckmaker also said it aims to be in the black, with a group operating profit ratio of 4.5 percent in the fiscal year ending March 2003. In the near term, though, the outlook is not as positive.
Nissan Diesel has been digging an ever-deeper hole for the past 10 years. Officially, the company's best performance came when it posted an operating profit of just $47.6 million in the fiscal year ending March 31, 1990, the peak year for medium- and heavy-duty truck sales in Japan due to the economic boom.
But industrywide sales have since tumbled to just half of 1990 levels, to roughly 80,000 in each of the past two years, and Nissan Diesel production and sales have tumbled correspondingly; the company produced just 21,000 trucks last year, down 22 percent from a year earlier, when production plunged 40 percent from the prior year.
After examining Nissan Diesel's books last October, Renault Chairman Louis Schweitzer said the truckmaker's net worth was 'not positive.' That might also summarize its outlook.