Nissan, Suzuki slash forecasts as auto gloom deepens

By Chang-Ran Kim, Asia autos correspondent

TOKYO (Reuters) - Nissan Motor and Suzuki Motor capped a turbulent week for automakers everywhere with their own profit warnings on Friday, as executives predicted a rough ride for the foreseeable future.

On top of an economic slowdown around the world and a credit crisis that is shutting many consumers out of auto-loan financing, Japanese automakers are battling a stronger yen, which shaves the value of earnings made abroad.

"I have no idea how long this situation will last," Suzuki CEO Osamu Suzuki told a news conference. "The crisis in the United States will probably ripple through the rest of the world like a tsunami, sooner or later."

Efforts by U.S. automakers Chrysler and General Motors Corp to forge a merger to help them ride out the crisis hit a snag after the Bush administration ruled out funding the plan, sources told Reuters on Thursday.

Joining a lengthening list of Japanese automakers, third-ranked Nissan more than halved its operating profit forecast for the year to March 31 to 270 billion yen ($2.7 billion) from 550 billion yen. That would be a 66 percent plunge from last year and is nowhere close to a forecast of 435 billion yen from a poll of 12 brokerages by Reuters Estimates.

It also marks the third time in as many years that Nissan would be missing its guidance, cranking up the pressure on Carlos Ghosn, who also is grappling with sinking profitability at Renault SA in his dual-CEO role at the Franco-Japanese alliance.

Nissan also retracted its dividend target of 42 yen, which had been viewed as doubtful given the slide in earnings and share price. It said it would pay 11 yen at the end of the first half and said the second payment would be disclosed next year.

Nissan, held 44 percent by Renault, hacked its net profit forecast to 160 billion yen from 340 billion yen.

Rival Suzuki Motor joined the fray, issuing its first-ever profit warning since it began reporting consolidated results a decade ago as the worst financial crisis in 80 years takes down even the healthiest automakers.

Suzuki, a maker of compact cars with about half of India's market, now expects to make operating profit of 100 billion yen ($1.02 billion) instead of 140 billion yen, and net profit of 60 billion yen instead of 80 billion yen for the year to March 31.

A poll of 11 brokerages had put the operating profit at 124 billion yen.

While Suzuki has little exposure to the United States, it is feeling the pain of slowing European and Asian sales, and the yen's surge against the euro and a basket of Asian currencies.

The acute economic crises in Pakistan and Hungary -- where Suzuki has recently expanded production capacity -- have also added to worries about its outlook.

DIVIDEND ELUSIVE

Nissan had made much of its commitment to a specific dividend as being shareholder-friendly and transparent, and rare among its peers. But Ghosn had warned this week that the industry, treading in "uncharted territory", needed to change its priorities and identified healthy cash flow as a top concern.