Suzuki profit takes 20% hit

Suzuki Motor posted a 20 per cent drop in quarterly operating profit as the March 11 earthquake hampered production, and stuck to its annual guidance for a small profit rise driven by the Indian market. Suzuki, like other Japanese automakers, is looking to make up for production lost due to the March disaster in the second half of the business year, with plans to increase output for the full year. The bigger worry for the maker of Swift and Alto cars is a slowdown in demand in its largest and most profitable market, India, where competition is also intensifying with global giants such as Toyota and Ford entering the small-car segment. Last week, local unit Maruti Suzuki India beat estimates with an 18 per cent rise in first-quarter net profit, but warned of a challenging environment for car demand as interest rates and fuel prices rise. Article continues below Suzuki's April-June operating profit was 25.57 billion yen (Dh1.21 billion), nearly double the consensus estimate of 13.8 billion yen in a survey of seven analysts by Thomson Reuters, as its motorcycle business returned to profit for the first time in 11 quarters. First-quarter net profit rose 24 per cent to 18.73 billion yen as it booked a one-off extraordinary profit of 8.6 billion yen, mainly from the sale of a unit of former partner General Motors to GM's Canadian unit. The yen's sharp appreciation, including against the Indian rupee, is also a drag, prompting Suzuki to join the chorus of complaints from Japanese automakers. "It's very sad that there is no one in Japan that is taking action against the yen's strength," Suzuki executive vice-president Toshihiro Suzuki told a news conference. He said if the yen continued to rise further, the automaker may have to consider the option of shifting production outside Japan, repeating a warning from his father and Suzuki CEO, Osamu Suzuki. Suzuki kept its full-year operating profit forecast at 110 billion yen, up 2.9 per cent from last year, and net forecast at 50 billion yen. A poll of 19 analysts by Thomson Reuters put the annual operating profit at 105.7 billion yen. Volkswagen hitch Toshihiro Suzuki had little to say about a public tiff that has developed with top shareholder Volkswagen, which it recently accused of undermining its independence. Suzuki last month lashed out at the German automaker for including a fine-print entry in its annual report that categorised Suzuki as an associate over which it could "significantly influence financial and operating policy decisions". Volkswagen, in response, has denied that it was trying to send a coded message to assert its control, but admitted that plans to cooperate had sputtered, forcing a review of their 18-month-old partnership. The younger Suzuki said the company would wait for Volkswagen to get in touch and explain its stance and intention after the summer break, repeating the Japanese automaker's stance that being equal partners was the prerequisite for any cooperation. Shares in Suzuki are down about 10 per cent in the year to date, faring worse than a 6.5 per cent fall in Tokyo's transport sector subindex . Before the results were announced, Suzuki shares ended down 2 per cent at 1,739 yen on a broad sell-off in Japanese stocks. Audi hopes to catch up Audi AG will introduce its top-of-the-line sports cars in the US next month to enhance the brand's image and charge higher prices as it bids to narrow the gap to luxury car leader Bayerische Motoren Werke AG. Audi's 340-horsepower TT RS will go on sale in the US next month, while the ¤78,000 (Dh 409,381) RS 5 coupe, which competes with BMW's two-door M3, will hit showrooms next year, sales chief Peter Schwarzenbauer said in an interview. Audi has a goal of doubling US sales of performance cars to about 16,000 by 2015. The Volkswagen AG luxury brand, which lags behind BMW and Daimler AG's Mercedes-Benz in pricing power, will offer the top- end RS variants as part of a decade-long effort to get more money for its cars. RS models, which have all-wheel drive and bigger engines, sell for a higher amount and help increase the appeal of the entire model range. "This is part of a very effective strategy on Audi's part to get the brand perceived to be something more," said Jim Hall, principal of 2953 Analytics, a consulting firm in Birmingham, Michigan. "Selling the RS 5 and the TT RS will continue that change of perception." The percentage of US consumers considering an Audi has grown to 5.5 per cent last month from 3.9 per cent in June of 2007, according to US auto website Edmunds.com. Audi sold 9,146 cars in the US last month, an increase of 17 per cent on the previous year and a record for the month, though less than half BMW's 21,409, the German carmakers said Wednesday. Audi's average selling price has increased 9.1 per cent since January of last year to $48,127. BMW prices fell 3.6 per cent to $52,552.