Suzuki CEO says strong yen, slow demand making business tough

Suzuki CEO says strong yen, slow demand making business tough

Hamamatsu, Japan: Japanese car maker Suzuki Motor Corp. will record its first monthly fall in worldwide production in 40 months for August as demand weakens in India and other markets, making it difficult for the company to meet various targets, its chief executive officer (CEO) said on Friday.

“The situation is getting tougher and tougher for everyone. It’s unnatural to expect a small company like ours to weather the storm when even the industry leaders are struggling," Osamu Suzuki said.

The car maker has been expanding its sales and profits for nearly a decade thanks to its lead in the Indian market and the growing popularity of small, fuel-efficient cars.

But it is feeling the pinch from sinking demand in developed markets and in emerging ones such as India. In August, Suzuki said its global production, which it is due to report officially Thursday, fell 14.2% from the same month last year.

Overall car demand in India, its single biggest market, fell 4.4% in August, down for the second straight month, due to rising borrowing costs and higher prices. Sales at Suzuki’s unit Maruti Suzuki India Ltd dropped 10%. India and Pakistan are set to account for more than one-third of Suzuki’s global sales this year.

Suzuki said that revenues in India were holding up relative to sales volumes thanks to brisk demand for more expensive models such as the Swift and the SX4. Revenues last month were down just 1.6% against a 10% fall in vehicle sales, he said. Between April and August, revenues rose 13% compared with a 5% growth in vehicle sales, he said.

Still, Suzuki said profits were facing pressure from a stronger yen, which diminishes the value of earnings made overseas.

“(Profit forecasts) are going to come under severe pressure with the dollar under 105 yen and the euro below 155 yen," he said. Suzuki is assuming a dollar rate of 95 yen and the euro at 150 yen for the October to March period. The car maker has forecast operating profit of 140 billion yen (Rs6,241 crore) for the year to March 2009, down 6.3% from 2007-08, when profits grew for the eighth straight year.