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Isuzu falls back after GM rescue plan

Isuzu President Yoshinori Ida, center, announced the rescue plan in Tokyo late on Wednesday
Isuzu President Yoshinori Ida, center, announced the rescue plan in Tokyo late on Wednesday  

Staff and wires

TOKYO, Japan -- Shares in Japan's Isuzu Motors dipped 6 percent by the close Thursday.

The fall followed its announcement a day earlier that top shareholder General Motors Corp and creditor banks would throw it a lifeline of at least 160 billion yen ($1.36 billion).

Isuzu's stock fell to 77 yen after gaining 19 percent the previous day on reports of the financial aid package.

The automaker, which is the world's biggest maker of medium-duty trucks and also sells four-wheel drive vehicles, touched a record low of 58 yen on December 20 last year.

Isuzu said in a statement Wednesday that despite posting an operating profit in the year to March 2002, its situation remained "very severe" because of the prolonged sales slump in the Japanese market and "lackluster performance" in North America.

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It said it had won the "support and understanding" of GM and Isuzu's main bank, Mizuho Corporate Bank

Analysts said while GM's rescue plan had saved Isuzu from near-bankruptcy, the outlook for its core domestic truck business remained far from bright, Reuters news agency reported.

"The program's cash-flow element amounts to 60 billion yen and does not decisively improve Isuzu's uneasy financial profile," Takaki Nakanishi, auto analyst at Merrill Lynch, told Reuters.

But he said the deal gave Isuzu the basic strength to "fully execute" its already announced recovery program.

Isuzu was the most actively traded stock on the Tokyo market's first section Thursday.

Recapitalized company

Under the deal, GM's current 49-percent shareholding in Isuzu will be cancelled and it will pay 10 billion yen for a 12 percent stake in a recapitalized company.

GM's total expenditure would come to 60 billion yen (about $510 million), with 50 billion yen going towards buying a 60-percent stake in Isuzu's Polish diesel engine unit and lifting to 60 percent its 40 percent holding in Isuzu's U.S. diesel engine unit.

Included in the deal was a 100 billion yen ($851 million) debt-to-equity swap by the truckmaker's major creditor banks, with most of the amount to be covered by Mizuho Financial Group.

Isuzu also said it would seek additional funds for further restructuring from banks amounting to more than 100 billion yen.

The deal represents a sharp turnaround for GM, which had repeatedly said it would not inject new funds into its troubled partner.

Reuters contributed to this report.


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