By Makiko Kitamura and Tetsuya Komatsu
Nov. 20 (Bloomberg) -- Isuzu Motors Ltd. and Mazda Motor Corp. will slash at least 2,700 temporary jobs in Japan as the companies reduce vehicle output because of falling demand. The stocks slumped.
Isuzu will terminate 1,400 temporary and part-time workers' contracts by the end of the year and cut one shift at a truck plant in Fujisawa, Japan from next month, said spokesman Naoki Ariizumi. Mazda will cut 500 workers at its factory in Yamaguchi prefecture, and 800 workers at its plant in Hiroshima prefecture, said spokesman Toyota Tanaka.
The yen has gained 17 percent against the dollar and 36 percent against the euro this year, eroding the competitiveness of the carmakers' exports. Tokyo-based Isuzu's sales in Thailand, its biggest overseas market, plunged 30 percent in October, the fifth straight monthly decline, and Mazda's sales in Western Europe tumbled 12 percent.
``With the macroeconomic environment's very drastic downturn, cutting temporary workers is the easiest and quickest measure to take'' to cut labor costs, said Hirofumi Yokoi, a Tokyo-based analyst at automotive consulting company CSM Worldwide. ``In truth, I'm sure the carmakers need and want to cut full-time workers as well.''
Isuzu dropped 17 percent to 123 yen, the lowest in more than five years. Mazda slumped 10 percent to 163 yen, the lowest close in more than seven years.
Yen's Strength
The yen's strength helped push down Japan's exports at the fastest pace in almost seven years last month. Isuzu said earlier this month it expects light truck sales to fall in all markets except for China in the fiscal second half.
The drop in demand echoes that of Volvo AB, the world's second-largest maker of heavy trucks. Volvo's European orders plunged 99.7 percent to 115 in the third quarter. General Motors Corp., the world's largest carmaker, said today it would suspend production of cars and pickup trucks in Thailand for a month and cut 8 percent of its staff in the country.
``Isuzu's sales are dropping in all regions,'' said Chikashi Okabe, a Tokyo-based analyst at Credit Suisse (Japan) Securities Ltd., who has a ``neutral'' rating on the company. ``It's very likely they will have to cut production further.''
Tokyo-based Isuzu slashed its fiscal full-year net income forecast 53 percent this month and Mazda lowered its forecast 29 percent in October.
Truck Demand
Hino, the country's largest heavy-duty truckmaker, will also halt production at a Tokyo plant for five days in December, said spokesman Hidenobu Tezuka.
A stronger yen will damp operating profit by 14 billion yen at Hino and 12 billion yen at Isuzu in the full-year period, according to the companies. Japan's currency traded at 95.89 to the U.S. currency today.
Mazda's domestic sales plunged 21 percent in October as Japan entered into a recession. In the U.S., the world's biggest car market, Mazda's sales dropped 26 percent.
U.S. consumer prices plummeted 1 percent last month, the most since records began in 1947, while housing starts tumbled to an annual rate of 791,000, a record low. The onset of deflation can be devastating for an economy as consumers and businesses delay spending to benefit from lower prices.
To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net: Tetsuya Komatsu in Tokyo at tekomatsu@bloomberg.net
Last Updated: November 20, 2008 02:08 EST
