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. Last Updated: 07/27/2016

Isuzu Unveils Ambitious Austerity Plan

TOKYO -- Isuzu Motors Ltd., one of Japan's top truckmakers and an affiliate of U.S. auto industry leader General Motors Corp., on Thursday unveiled an ambitious plan to pare its work force, slash its heavy debts and boost profitability.

Battered by tumbling truck sales and a loss-making domestic dealer network, Isuzu disclosed its plans less than a week after GM said it would inject an added 52.5 billion yen ($452 million) into the company by buying new shares.

"Our debt-equity ratio is a very serious problem," Isuzu chairman Kazuhira Seki said at a news conference.

"We can't solve our problems simply by expanding our business with General Motors," he said. "We needed to carry out radical reforms."

The company said it aimed by March 2000 to cut 300 billion yen, or 30 percent, from its consolidated interest-bearing debt and to sell 100 billion yen in assets.

The Japanese firm also plans to shed one-tenth of its 40,000 group-wide work force by March 2001. The downsizing will be done largely through attrition and cutbacks in contract workers.

The announced austerity program took particular aim at the truckmaker's domestic dealerships, 70 percent of which were expected to post a loss for the current fiscal year to March 1999.

"The biggest problem is our dealership network," Seki said.

"The organization hasn't changed since it was set up 40 years ago," he added.

Isuzu will cut the number of domestic dealerships by more than half over the next three years and at the same time expand its network of service centers.

The company will also begin exporting one-ton pickup trucks to Australia from its Thai factory in mid-1999 and will move all of its pickup truck production lines from Japan to Thailand within the next two to three years.

"Except for Indonesia, I think Southeast Asia has hit bottom and may recover more quickly than Japan, although the situation right now is quite bad," Seki said.

He added that Isuzu had already cut its Southeast Asia work force by half in the wake of the region's economic crisis, which has been battering the area since 1997.

He was cautiously optimistic about Japan's heavy-duty truck market, which shrank an estimated 37 percent this year to 95,000 units, according to industry data.

"There's a whiff of slight movement, but I don't know if it's going to last," he said.

"I think the mood has changed quite a bit, but we haven't incorporated this into our figures."

Seki rejected a reporter's suggestion that the restructuring may have been a quid pro quo for General Motors' recent additional investment in Isuzu, which will raise the U.S. automaker's stake to 49 percent from 37.5 percent.

"[The two announcements] have absolutely nothing to do with each other," Isuzu's chairman said. "We have not yet discussed our plans at all with GM, although we will do so if necessary."