Car, truck makers clock weak results

Written by Reuters | Updated: Aug 1 2009, 04:53am hrs
Automakers in Europe and Japan unveiled weak results for the first half of the year on Thursday and are set to keep tight control over costs, but most predict an improvement in conditions for rest of 2009. Europe's largest car maker Volkswagen said Thursday second-quarter profit sank sharply as France's Renault swung into a first half loss, but said it would increase production as the outlook had improved. In Japan, automakers Mazda Motor Corp and Mitsubishi Motors Corp also posted losses for a third straight quarter, but kept their annual forecasts unchanged, relying on cost cuts to offset the weak demand.

Volkswagen's net profit for the three months to June 30 was 283 million euros ($399 million), down 83% from the same period a year ago. Operating profit fell 56% to 928 million, but far exceeded average analyst expectations for 628 million profit.

Renault, which has a 44% stake in Japanese carmaker Nissan Motor Co, said its first half net loss was 2.712 billion euros against a net profit for the same period in 2008 of 1.467 billion and forecasts for a 2.36 billion loss.

The DJ Stoxx European Autos index was up 1.09% at 10.56 GMT.

Automakers have seen sales crumble in the past 12 months due to global economic downturn and tight credit markets that have already driven US rivals General Motors and Chrysler to bankruptcy and restructuring.

Renault now expects the world automotive market to fall 12% in 2009 compared with last year to over 57 million units, an improvement over its earlier forecast of a 15% contraction this year.

Renault said it aimed to produce 164,000 more cars than it originally intended this year. This means Renault can sell 15% more cars in the second half than the first half, and can continue the claw back of free cash flow and further reduce debt, said analysts at Morgan Stanley in a research note.

Volkswagen, meanwhile, reported a surge in free cash flow of 4.3 billion euros during the first half leaving automotive net cash at 12.3 billion by the end of June, a war chest that would enable it to easily buy sports car maker Porsche.

However, Renault still expects Europe's car market to finish the year with an 8% decline, after a 13.7% fall in the first six months. Renault itself is showing resilience, chief executive Carlos Ghosn said, adding it was preparing for the post-crisis period with zero emission vehicles, expansion of its entry-level range and a move to expand synergies with partner Nissan.

The group said that despite the effects of incentive schemes to scrap older cars in major European markets, Europe made up half the total revenue decline. Group revenues fell 23.7% to 15.99 billion euros in the period.

French carmaker PSA Peugeot-Citroen on Wednesday posted a first-half loss and said it did not see a recovery in Europe starting before the end of 2010 but said it saw good potential from the Chinese and Brazilian markets.

Car parts maker Valeo on Wednesday posted a 54 million euros second-quarter net loss, but forecast a rebound in auto production in the third quarter.

German truck maker MAN SE said on Thursday it saw no sign of an upturn as it posted a plunge in second-quarter operating earnings in line with market expectations. Truck makers such as MAN and its Swedish rivals Volvo and Scania have equally been hit hard by plummeting demand over the past year as the economic downturn has run its course. German peer Daimler Trucks, the world's biggest truck maker, this week reported a 1.1 billion euros deterioration in second-quarter EBIT, swinging to a substantial loss after unit sales fell 56%.