Suzuki struggles as India demand slows
Tokyo, September 21, 2008
Suzuki Motor Corporation will record its first monthly fall in worldwide car production in 40 months as demand weakens in India and other markets, making it increasingly difficult for the company to meet various targets, its chief executive said.
"The situation is getting tougher and tougher for everyone. It's unnatural to expect a small company like ours to weather the storm when even the industry leaders are struggling," Osamu Suzuki said.
The compact car maker has been expanding its sales and profits for nearly a decade thanks to its lead in the burgeoning Indian market and the growing popularity of small, fuel-efficient cars.
But like most car makers it is feeling the pinch from sinking demand in developed markets and more recently in emerging ones such as India.
Last month, Suzuki said its global production, which it is due to report officially on Thursday, fell 14.2 per cent from the same month last year.
Overall car demand in India, its single-biggest market, fell 4.4pc last month, down for the second straight month, due to rising borrowing costs and higher prices. Sales at Suzuki's majority-held unit Maruti Suzuki India Limited dropped 10pc.
India and Pakistan alone are set to account for more than one-third of Suzuki's global sales this year.
Suzuki said, however, that revenues in India were holding up relative to sales volumes thanks to brisk demand for more expensive models such as the Swift and SX4.
Revenues last month were down just 1.6 per cent against a 10 per cent fall in vehicle sales, he said. For the business year to date, or April-August, revenues rose 13pc compared with a 5pc growth in vehicle sales, he said.
Still, the 78-year-old CEO, who has been at the helm for 30 years, said profits were facing major pressure from a stronger yen, which diminishes the value of earnings made overseas.
"Profit forecasts are going to come under severe pressure with a dollar under 105 yen and euro below 155 yen," he said.
Officially, Suzuki is assuming an ultra-conservative dollar rate of 95 yen and the euro at 150 yen for the second half of the business year from October to March.
Suzuki has forecast operating profit of 140 billion yen ($1.33 billion) for the year to March, down 6.3pc from 2007/08, when the profit grew for the eighth straight year.