Japan Auto Outlook Cut at Goldman on Slowing U.S. Growth

Japan’s automobile industry was lowered to “neutral” from “attractive” at Goldman Sachs Group Inc. (GS), which cited slowing U.S. economic growth and prolonged strength of the yen.

Toyota Motor Corp. (7203), Japan’s largest carmaker, had its share-price target cut 10 percent because of a possible slowdown in demand, according to a report by Tokyo-based Goldman Sachs analysts led by Kota Yuzawa. They also reduced their estimates for Nissan Motor Co., Honda Motor Co., Mazda Motor Corp., Suzuki Motor Corp., Fuji Heavy Industries Ltd. (7270) and Yamaha Motor Co.

“We now expect all Japanese automakers will return to normal production this autumn,” the analysts wrote in the Aug. 18 report, in reference to a slowdown after Japan’s March 11 earthquake and tsunami. “Yet while automakers are planning to ramp up production sharply in 2H, concerns about the demand side are emerging.”

Analysts are reducing estimates for U.S. automobile sales for 2011 and 2012, as consumer confidence in the U.S. economic outlook slumped in August to the lowest level since the recession, raising the risk that spending will dry up.

The Bloomberg Consumer Comfort Index’s monthly expectations gauge dropped to minus 34, the weakest since March 2009, from minus 22 in July. Applications for unemployment benefits climbed last week to the highest level in a month, Labor Department figures showed yesterday in Washington.

Lowering Estimates

Toyota’s shares fell 1.4 percent to 2,768 yen at the 3 p.m. close of trading in Tokyo, while Nissan declined 4.4 percent and Honda slid 3.3 percent. The benchmark Nikkei 225 (NKY) Stock Average fell 2.5 percent.

The yen traded as high as 76.95 to the dollar today after Finance Minister Yoshihiko Noda said he’s ready to act to stem gains in the currency, which is approaching postwar highs. Authorities last intervened two weeks ago.

Toyota sees a yen stronger than 80 to the dollar as a brake on growth. Every one-yen gain against the dollar cuts its operating profit by 34 billion yen ($444 million), according to the company’s full-year outlook. A stronger yen cuts the value of exporters’ repatriated earnings.

Forecasts Cut

J.D. Power & Associates lowered its 2011 estimate yesterday by 300,000 light vehicles to 12.6 million. Goldman earlier cut its forecast for U.S. auto sales this year by one million units to 13.5 million, and said “a strong recovery in U.S. auto sales is unlikely in a climate where the U.S. consumer spending trend is below 2 percent.”

U.S. sales at Toyota fell 23 percent in July, while Honda deliveries dropped 28 percent. Industrywide sales of new cars and light trucks totaled 1.06 million in July, a 0.9 percent rise from a year earlier, according to Woodcliff Lake, New Jersey-based Autodata Corp.

Toyota’s share-price estimate was reduced to 3,600 yen from 4,000 yen on a “mismatch” between its expansion and concerns over a possible slowdown in demand, according to the report. The Toyota City-based automaker raised its full-year sales forecast this month to 7.6 million units from an earlier estimate of 7.24 million units.

Nissan’s target price was cut to 1,050 yen from 1,100 yen. Honda’s was lowered to 3,600 yen from 4,200 yen. Goldman Sachs maintained its “neutral” rating on Toyota and “buy” recommendations for Honda and Nissan, its top pick in the industry.

Daihatsu Motor Co. gained 2.4 percent to 1,249 yen after its rating was increased to “buy” from “neutral.” Its target price was raised to 1,650 yen from 1,500 yen.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Anna Mukai in Tokyo at amukai1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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