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Japan carmakers enjoy historic first half on soft yen, US sales

TOKYO -- Many of Japan's automakers likely generated record profits in the April-September period despite sluggishness at home and elsewhere in Asia, thanks to the weaker yen and strong showings in North America.

     Operating profit at Fuji Heavy Industries, the maker of Subaru vehicles, likely jumped about 50% to a record 280 billion yen ($2.29 billion) or so, surpassing a projection of a 31% increase. Mazda Motor's profit is seen at 120 billion yen, up 15%, compared with the estimate of a 9% drop. Suzuki Motor also likely saw profit growth of about 10% to around 100 billion yen, beating the projected 1% growth. All of them likely achieved all-time-high profits for a first half.

     Nissan Motor, which has not released guidance for the half, likely saw profit surge around 50% to roughly 400 billion yen, approaching the 411.5 billion yen record from April-September 2005. Toyota Motor also likely notched its highest-ever profit for the period.

     The combined profit of seven major Japanese automakers apparently reached a record for a second straight year as strong North American sales offset sluggishness in Japan, Indonesia, Thailand and other Asian markets.

     New-auto sales in the U.S. are seen reaching 17 million units for the first time in 14 years this year, helped by low interest rates and cheap gasoline. Sport utility vehicles, which offer high margins to manufacturers, are faring particularly well.

     Fuji Heavy's Subaru Forester, Nissan's Rogue and other competitive new offerings are boosting earnings power. Suzuki, meanwhile, performed well in India, where it enjoys the top market share.

     After curbing investments following the financial crisis, Japanese automakers have streamlined their operational structures. So sales increases now tend to translate directly into profit. This partly explains their notable earnings growth compared with European rivals.

     The weaker yen is a big help as well. The yen traded at 121 per dollar in the April-September period, about 18 yen weaker than a year earlier. Fuji Heavy and Nissan likely got a 100 billion yen boost from the softer Japanese currency, with this windfall absorbing the negative impact of declines in emerging-market currencies such as the Russian ruble and Brazilian real.

     Concern over the Chinese market, the world's largest, is growing, but the impact so far has been light. Nissan, which leads Japanese automakers in the Chinese market, saw a 2% sales increase there in the January-September period. Mazda's sales shot up 13%.

     The auto sector accounts for about a fifth of all profit generated by Japan's listed companies. Major automakers' brisk performance despite slowdowns in emerging markets is also likely benefiting suppliers.

     Yet uncertainties still hang over the Chinese market and the impact of the Volkswagen emissions scandal on diesel-vehicle sales is difficult to gauge. Automakers will report results for the April-September period in early November. After a stellar performance, the second half may not be quite so friendly.

(Nikkei)

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