GM Needs Global Aid in Worst Auto Market Since 1945, Lutz Says

General Motors Corp., surviving with U.S. federal loans, needs government help worldwide to get through the worst automotive market since the end of World War II, Vice Chairman Robert Lutz said.

The slump is forcing GM to undergo changes it has needed to make for years, such as reviewing the future of its Hummer, Saab and Saturn brands, Lutz said today in a Bloomberg television interview from Geneva. Lutz, who rejoined GM in 2001 to help revitalize its auto designs, will retire at the end of this year.

“We will go through a rough spot as will every other automobile company,” said Lutz, 77. “We will get through and come out the other end stronger and more competitive than ever before.”

GM has received $13.4 billion in U.S. aid and is seeking more to keep its operations in its home market running through this month. The Detroit-based company last week said it will need help in Germany and other countries to restructure its European operations, with the focus on the Opel brand.

The largest U.S. automaker would like to maintain “technical and operational” control of Opel as it seeks 3.3 billion euros ($4.2 billion) in aid from Europe and $1.2 billion in cost cuts, Lutz said.

Hyundai hikes car prices by up to Rs 14,636

The country's second largest car maker, Hyundai Motor India, on Friday hiked the prices of its popular hatchbacks Santro, i10 and sedan Accent across all variants by up to Rs 14,636 with immediate effect to offset rise in input cost.

"The price hike is primarily due to rise in input cost.

The price hike ranges from 1.2 per cent to 3 per cent," the company said in a statement.

The company's flagship hatchback Santro will be costlier by Rs 3,601 to Rs 5,163 after the hike, it said.

Its premium compact car i10 will now be dearer by Rs 3,974 to Rs 7,637, while its sedan entry level Accent will cost Rs 14,636 more.

The company, however, did not tinker the Price of its newly introduced top-end sedan Sonata, while mid-sized sedan Verna was launched earlier this week with a new sports variant and at a revised price tag ranging between Rs 6.37 lakh and Rs 8.65 lakh.

Last December HMIL had reduced the prices after the government's announcement of a four per cent reduction in Cenvat.

Focus is about doing more work on fewer things

Another dimension of the gridlock challenge is that customers build loyalty with companies based on very specific attributes Volvo for safety, Nordstrom for customer service, Nike for sports performance, Honda for reliable motors. Does that mean that Volvo doesn't have any performance engineering or pay any attention to ergonomics for comfort? Of course not. But when Volvo advertises, they emphasize safety. When they make trade-offs and tough decisions on manufacturing costs and designs, they bias decisions toward the value of safety.

Opportunistic companies, in contrast, have no central strategic and market focus and end up taking a stand on everything and, therefore, nothing. The unfocused companies will also launch best-practices efforts on every part of the business, regardless of whether the area is a differentiator in the eyes of customers. This creates more task overload and is overkill in some areas. In a well-focused company, in contrast, you should drive to set (not meet) the standards for best practices in the areas that are the highest value points for your customers ones that create lasting customer relationships.

Often, companies that grow through acquisitions have a tough time gaining a single market focus. Either a company, over time, builds a unique standing in the eyes of customers, or it is not successful. The challenge in acquisitions is in knowing how to leverage "the best of the best" from each acquired entity to create a new "one company" perspective. As an engineering manager in an acquired division put it, "We are just a bunch of separate companies all with the same business card." His company was in gridlock over RandD funding decisions. Each business fought for its own funding with many overlapping business plans in the marketplace, which you would expect because these were supposed to be complementary businesses. The negotiated outcomes of the RandD budgeting process had resulted in subpar funding for everything, including the portfolios that should have received a "doubling down" of bets. The market's perspective? Jack of all trades, master of none. A lack of focus is a sure way to maintain a mediocre position in the market.

Imagine you are leaving a major stadium from a sporting event. When traffic comes to a halt in gridlock, is it because all of the drivers have stopped wanting to move ahead? Of course not. In fact, the more the gridlock sets in, the more frustrated people get and the more they try to push and inch forward usually at the expense of blocking the progress of others. Because each person has his or her own intentions, eventually too many people with their own agendas meet up at the same intersections. What is needed is some prioritization of traffic flows, the sequencing of longer runs of traffic in specific directions, and a traffic cop to call out the directions clearly. It is the same at a gridlocked organization.

The only way to cure the gridlocked organization and generate the required focus to execute is to be willing to start at the top, set a clear direction, set priorities, and let people's underlying motivations and innovations begin to emerge and build momentum. It takes a leader seeing the pattern of gridlock and stepping up to prioritize efforts and set clear direction to get started.

As put by Len Rodman, chairman and CEO of Black and Veatch, "When I think about what worked in those days at the start of the ACT process, it was the ability to look at a few items and put our energy there. When things are difficult and change needs to happen, it seems that there is a plethora of things to work on there is always something else that comes up. But we found, by focusing on a very few things everybody could work on, that channeled the mass of the organization in the right direction."

A common fear of many leaders is that if they admit that the organization is doing too much, they will lose their ability to motivate the team to do more. Managers might believe such an admission will build in an excuse for people at all levels to not work harder and to not deliver results. In response, these leaders try to rally the team to step up, thereby adding to the overload rather than prioritizing major initiatives. This just overwhelms an already overtaxed system. And, when the leader keeps raising the bar relentlessly, and calling for more and more effort, it becomes political suicide for any team member to throw up the white flag and call out the issue of task overload. Instead, everyone just hunkers down further in their fox holes, checking the boxes on their tasks as fast as they can.

Focus is not about doing less work overall, but rather doing more on fewer things. You need not give up on the call to grow the organization rapidly or for people to work hard. You just have to be willing to shoulder the risks of clearly articulating a tight focus on what will and won't be done. You need to lead the way to make the tough choices that mean less hedging of bets, and then trust the team to execute with more impact and accountability because they are now called on to drive further against fewer goals. Bill Barnes, a private equity investor at one of the world's largest Swiss banks and former executive at a $30 billion computer manufacturer, describes focus well. He points out that, "Focus comes from clearly understanding the unique elements of your business model and market strengths that are the drivers of your success. And there are times when you can't simultaneously do two things well and will need to focus on your core priorities." Although, he also points out, "You can't get so narrowly focused that you lose sight of how the business environment is changing around you so you'll need to continually reassess your focus."

Shares pledged by Tatas hit Rs 10K cr

The Tatas have disclosed their share pledging details in three more group companies, including Tata Communications and Tata Tea , taking the total amount raised by promoters of the nine firms to nearly Rs 10,000 crore.

The value of the shares pledged by the promoters has been estimated to be about Rs 10,000 crore as per Wednesday's closing price of the nine firms - Tata Communications, Tata Tea, Tata Chemicals, Tata Motors , Tata Coffee, Tata Steel , Tata Power, Tata Teleservices (Mah) and Indian Hotels. Six Tata group firms had revealed their share pledging details till Tuesday.

Tata Communications (formerly VSNL) on Wedneday said two of its promoters, Tata Sons and Pantone Finvest, have pledged three crore shares, representing a 10.53 per cent stake in the company. At Wednesday's average market price, the shares pledged would have fetched Tata Sons over Rs 1,329.65 crore.

Tata Tea said its main promoter Tata Sons has pledged 70 lakh shares, representing 11.32 per cent stake in the company with lenders. Calculated on the basis of the current market price of Tata Tea scrip, the pledging would have fetched the promoters over Rs 389 crore.

Tata Chemicals said three of its promoters - Tata Tea, Tata Investment Corporation and Tata Sons - pledged 4.70 crore shares or 20.02 per cent stake in the company with lenders. The value of this stake is over Rs 705 crore.

The Tata group has 27 listed entities. However, TCS, Tata Sponge Iron, Tata Investment Corporation are among the Tata Group companies which are yet to disclose the promoter share pledging in respective firms.

Meanwhile, the group's holding entity Tata Sons had said: "It (share pledging) is not a new practice. It has been existing since the age of joint stock companies. It has been done primarily for long-term funding requirements of Tata Sons."

Tata Sons pledges shares in 3 more large group cos

A day after three major Tata Group companies - Tata Steel (TATASTL.BO), Tata Power and Tata Teleservices (Maharashtra) Ltd - said that their promoter Tata Sons has pledged shares in these companies to raise funds, Tata Motors (TATAMOTORS.BO), in a filing on the National Stock Exchange (^NSEI) (NSE) said Tata Sons has pledged 3.72 crore shares, or 8.15% of the total equity capital held by the promoter. Tata Sons Ltd held 28.58% in Tata Motors. As per the closing price of Tata Motors shares on Tuesday on the Bombay Stock Exchange (^BSESN) (BSE) on Tuesday, the value of the total number of shares pledged is Rs 516.52 crore. The shares of Tata Motors closed at Rs 138.85 on the BSE on Tuesday, down by 1.84%.

Tata Motors has been recently in the news for a number of reasons, including sluggish sales of vehicles leading to its first losses in seven years. For the third quarter (Q3'09), Tata Motors had posted a net loss of Rs 263.26 crore as compared to a net profit of Rs 499.05 crore in the same period last year. The company has also been finding it difficult to raise funds for the much-touted the Jaguar Land Rover (JLR) acquisition last year. It is yet to raise $2 billion of the total $3 billion bridge loan taken by it for the JLR acquisition. The company has already paid back $1 billion of the bridge loan. It has recently said it is in talks with various banks to raise the $2 billion. Last week, it hinted at a possible delay in payments to its vendors and suppliers. The company is also facing a tough situation relocating its Nano project from Singur in West Bengal to Sanand in Gujarat, owing to issues over land acquisition in Singur.

Other Tata companies that also saw promoters pledging their shares were Indian Hotels Company (IHCL) and Tata Coffee. IHCL said promoter Tata Sons has pledged 2.50 crore shares representing a 3.46% stake in the company, while Tata Coffee said its main promoter Tata Tea Ltd (TATATEA.NS) has pledged 107,35,982 shares representing 57.48% stake in the company.

To check recurrence of a Satyam (SATYAM.BO)-like situation, where the promoters had pledged shares in the company, market regulator Sebi had decided to make it mandatory for promoters (including promoter groups) of companies to make full disclosures if they pledge shares. Sebi has mandated the disclosure of the pledged share as part of their quarterly earnings from March quarter onwards.

Bajaj fails to move up 2-wheeler hierarchy

Bajaj Auto has remained stagnant at the number four position among India's two-wheeler companies for the fourth consecutive month, behind Hero Honda Motor India, Honda Motorcycle and Scooter India (HMSI) and TVS Motors. Last November, HMSI had pipped Bajaj Auto from the number two position. In December, sales of Bajaj Auto fell further and it was pushed to the number four slot by Chennai-based TVS Motors.

"Dealer stock normalisation, which had happened in November and December, continued into January as well. Due to this, the company registered low sales last month," said Rajiv Bajaj, managing director, Bajaj Auto.

This dismal performance of the two-wheeler company comes despite the January launch of the new XCD 135cc. The company, however, feels that since the vehicle was launched in the second half of last month, it is too early to feel its impact.

"The XCD 135 was launched on January 21 and February would be the first month of sales for the bike," said Bajaj. He noted that the company has a target to sell 20,000 units of the bike.

"Once the dealer stock gets back to normal and sales of XCD picks up this month, we expect Bajaj Auto to regain its number two position in the domestic two-wheeler industry in February," he said.

Whereas sales of almost all players went up in January vis- -vis November, Bajaj Auto registered a 19.6% decline in January. It sold 66,696 units during the month as compared to 82,919 units in November 2008. Consequently, the gap between Hero Honda and Bajaj Auto increased by almost 23% to 2,44,334 units in January vis- -vis 1,98,740 units in November last year.

According to the Society of Indian Automobile Manufacturers', Hero Honda, the leading two wheeler manufacturer in the country with a market share of around 56%, sold 3,11,030 units in January this year followed by 90,796 units of HMSI and 79,729 units of TVS Motors.

The poor performance of Bajaj in the domestic arena could be owed to a mix of factors like inappropriate product portfolio, near absence from the scooter segment and the company's increased focus on niche products, feels a Mumbai-based analyst.

"The kind of products that Bajaj has in the market is not comparable to its competitors. Moreover, the company has completely moved from the entry-level 100cc segment. Consequently, players like Hero Honda and TVS are increasing their market share in that category," he said. Though scooters constitute a small part of total two-wheeler industry, Bajaj's absence from the segment has further dampened the company's position in India, he opined.

Nissan reports 83.2 bn yen loss in Q3; to cut 20,000 jobs

Hit by declining sales and the surging yen, Japanese auto-maker Nissan reported a net loss of 83.2 billion yen ($0.81 billion) for the third quarter ended December 31, 2008, compelling the firm to slash 20,000 jobs or about 8.5% of its workforce.

Further, the worsening state of the global economy and deterioration in global auto markets have led the company to forecast its first full year loss of 265 billion yen in nearly a decade for FY08 and projects net revenue of 8.3 trillion yen in the year. The company had a net income of 132.2 billion yen for the December quarter in the FY'08, Nissan said in a statement.

"The loss is driven by the severe downturn in the global economy in the second half of calendar year 2008 and, in particular, the negative impact of the strong yen, the sharp decline in consumer confidence in all major markets and product mix deterioration," it added.

During the quarter, net revenue stood at 1.81 trillion yen, down 34.4%.

Nissan has also announced recovery actions designed to enhance the company's performance during the current global economic and financial crisis.

"Global headcount will be reduced by 20,000 through FY 2009, reducing Nissan's headcount from 235,000 to 215,000", the car-maker said in the statement.

He company further said joint manufacturing projects with Alliance partner Renault in Morocco and India would be revised.

"In Chennai, the joint plant will proceed with a reduced ramp-up speed," it said.

Nissan sold 7,31,000 vehicles worldwide in the October to December 2008 period, down 18.6%.

Commenting on the quarterly results, Nissan president and chief executive officer Carlos Ghosn said for every plan of the company, the worst assumptions on the state of the global economy have come true or turned out to be even worse, with the continuing credit short age and declining consumer confidence being the most damaging factors.

Further, the company stated that there would be no bonus payments to the board of directors for 2008-09.

Salaries paid to board members and corporate officers would be reduced by 10% and those for managers in Nissan Motor Co and affiliate companies in Japan would be cut by five%.

Salary cuts would be starting next month and continue until the situation clearly improves, it added.

For the nine months ended December 31, 2008, Nissan posted a net income of 43.2 billion yen, down 87.5% compared with the previous year, while its net revenue fell 14.7% to 6.68 trillion yen.

Vendors demand 100% compensation from Tata Motors for Singur investment

Facing liquidity crunch, the vendors of Tata Motors are looking for 100% compensation for their investments at Singur in West Bengal. While the exact investment by the vendors so far could not be known, industry sources said it could be around Rs 600-700 crore. Ratan Tata, chairman of the Tata group, announced the pull out of the Rs 1,500-crore small car project from Singur in October 2008 following violent protests from the Opposition.

"The company had offered us 75% compensation, but we have demanded the entire amount," said a New Delhi-based vendor. According to him, Tata Motors wanted them to absorb at least 25% of their investment in Singur. "It is difficult for us, especially in a financial situation like this," he said.

The West Bengal Industrial Development Corp (WBIDC) had earmarked about 290 acres, adjacent to the proposed Nano plant, for vendors' units.

Around 60 vendors intended to set up their units at the site. Caparo Engineering, Bosch Chassis Systems, Gabriel, Lumax Industries, Kinetic Engineering, Rasandik Engineering, Rico Engineering, TI Metal Forming, Sona Koyo Steering Systems Ltd, Exide , Subros, Beher, Rucha Engineers Pvt Ltd, and Tata Ryerson are some of them.

Meanwhile, vendors are also looking at the possibility of moving their assets from Singur as there has not been any activity at the site during the last four months. They are reportedly looking at the possibility of returning the land to the state government.

Tata Motors has asked the vendors to take up the issue of moving assets with the WBIDC. According to sources in the government, returning land would be a complicated task as there are "legal and contractual obligations".

Nissan to layoff 20,000 workers worldwide

Nissan Motor Co said on Monday it would lay off 20,000 workers worldwide in the year from April 1.

The automaker also said it was cutting capital spending by 21 percent in the year to March 31 and would cut such outlays by a further 14 percent in the year from April.

Nissan forecasts annual loss, first under CEO Ghosn

TOKYO - Nissan Motor Co said it would cut 20,000 jobs and joined a growing list of automakers warning of red ink this year in what would mark its first loss since Chief Executive Carlos Ghosn took the reins a decade ago.

The spreading global recession has put consumers off buying expensive goods and even if they wanted to purchase a car, financing has become difficult due to a dearth of credit.

Saddled with excess capacity and headcount and with sales plummeting in developed markets, Japan's No.3 automaker has already taken a number of steps to cut production and staff, including through 1,200 voluntary buyouts in the United States.

With these and other measures, including reducing 12,000 jobs in Japan mostly through natural attrition, Nissan said it would reduce groupwide headcount by a total 20,000 by the end of March 2010, equivalent to 8.5 percent of the workforce.

Nissan, 44 percent-owned by Renault SA, now expects an operating loss -- its first in 14 years -- of 180 billion yen ($2 billion) for the year to March 31, instead of the 270 billion yen profit it projected three months ago. Consensus forecasts from 19 analysts had put the loss at 70 billion yen.

Nissan expects its net loss at 265 billion yen instead of a 160 billion yen profit.

"Earnings are going to be bad at automakers for some time," said Tomomi Yamashita, senior fund manager at Shinkin Asset Management.

"You've got the currency problem and the amount of production adjustment that's ahead," he said, adding that automakers could be in the red for a few more quarters.

Last week, Toyota Motor Corp tripled its annual operating loss forecast citing a faster-than-expected sales slump in the main U.S., Japanese and European markets.

Honda Motor Co also cut its forecast last month, but expects to stay in the black.

In the year to March 31, Nissan said it would produce 3,069,000 vehicles, or 20 percent less than it had planned at the start of the business year. It expects sales of 3,382,000 vehicles in 2008/09, down 10.3 percent from last year.

For the October-December third quarter, Nissan made an operating loss of 99.2 billion yen and a net loss of 83.2 billion yen. A year ago, it made an operating profit of 211.9 billion yen and net profit of 132.2 billion yen.

Third-quarter revenue fell about a third to 1.8 trillion yen.

COUNTER-MEASURES

With the triple blow of a credit crisis, recession and a strong yen making life tough for Japanese automakers, Nissan outlined steps to save cash and focus on a healthy balance sheet.

Specifically, Nissan said it would aim to return to positive free cash flow next business year even as it assumes the global vehicle market will shrink to 55 million units in 2009 from 62 million last year, and for the dollar to average 90 yen.

The efforts will focus on three areas: recovering profit, preserving cash and pursuing deeper savings with Renault, details of which would be outlined in three months.

To that end, Nissan said it would cut labour costs by a fifth in high-cost regions such as Japan, the United States and Europe, including by reducing high-ranking officials' salaries by 10 percent. No bonus will be paid to directors this year. Nissan will also negotiate work-sharing schemes.

Nissan plans to reduce capital spending this year by 21 percent to 384 billion yen, and a further 14 percent in 2009/10 to 330 billion yen or lower if necessary, including by suspending its participation in a factory project led by Renault in Morocco.

"All these actions and countermeasures are not merely short-term fixes," Ghosn told a news conference in Tokyo.

"They will enable our company to recover and secure a more competitive position that will benefit Nissan long after the current crisis subsides."

Ghosn said he was putting Chief Operating Officer Toshiyuki Shiga in charge of functional operations, mirroring a structure introduced at Renault in October with COO Patrick Pelata at the top. Both will continue to report to Ghosn.

SINKING VALUE

Shares in Japanese automakers have tumbled cross the board in the last year but Nissan has fallen harder than Toyota and Honda, which have healthier balance sheets and liquidity positions.

Rising debt at Renault, in which Nissan holds 15 percent, has also raised worries about any knock-on effects on the Japanese automaker.

Nissan's shares have dived more than 70 percent in the last 12 months, while Toyota and Honda are down 47 percent and 30 percent. Nissan has shed $12 billion in market value since Ghosn arrived from Renault to rescue Nissan in 1999.

Nissan's shares are the worst performer in the domestic auto sector in the year to date, falling 13 percent against a 7 percent rise in Tokyo's transport sub-index. The stock ended down 5.8 percent at 261 yen ahead of the results.

Bajaj Auto eyes 35% market share in TN

Two-wheeler major Bajaj Auto Limited(BAL) is targeting 35% market share in Tamil Nadu as against 20% now through a slew of new launches and aggressive marketing. The company, which has announced the launch of XCD 135 DTS-Si, junior version of its premium bike Pulsar, will help increasing the company's market share in the middle (value) segment to 30% in the next 12 months as against 5% now, said S Manoj Kumar, regional head (Tamil Nadu and Puducherry), said.

Addressing a press conference here on Saturday, he said the company is planning to launch two more vehicles in the value segment in the next two to three months in India. With the existing models of XCD 125 and 135 versions coupled with new models, the company hopes to increase its overall market share to 35% in the State as against 20% now, he added.

Responding to queries, he said, the new vehicle is the junior version of Pulsar, which is affordable, sporty, less weight and family-friendly one. "We expect to sell 15,000 units XCD in the next two months (Feb, March) and are targeting to sell 4,500 units to 5,000 units a month in the State alone, he said. The product, comes in three variants, priced between Rs 43,000 and Rs 47,000, he added.

Bajaj is the leader at the entry and premium segments in the State with 35% and 56% market share, respectively. "With the new launches, we hope to gain substantial market share in the middle segment too," he said. The company is currently selling 8,500 units a month in the State which would be increased to 15,000 units from April onwards. The company hopes that aggressive market coupled with the finance from Bajaj Auto Finance Limtied will help drive the growth, he added.

Toyota sees first annual net loss since 1950

Toyota sank into the red for the October-December quarter and acknowledged Friday it was heading for its first annual net loss since 1950 because of plunging global automobile sales and the strong yen.

Joining a string of Japanese companies that have slashed forecasts, Toyota Motor Corp. said it expects a net loss of 350 billion yen ($3.9 billion) for the year through March.

That's a stunning reversal from the record 1.72 trillion yen profit the maker of the Prius hybrid and Lexus luxury car posted the previous fiscal year. In December, Toyota thought it would eke out a small net profit, but the outlook has darkened further since then, especially amid a dramatic contraction in the US auto market.

For the fiscal third quarter, Toyota racked up a 164.7 billion yen loss, down sharply from the 458.6 billion yen profit it had the same period the previous year, as the global slump squelched sales.

Quarterly sales plunged 28.4 per cent to 4.8 trillion yen.

The last time Toyota, which last year overtook General Motors Corp. to become the world's best-selling auto company, had an annual net loss was in 1950 when it reported only parent results. Since it began reporting group results in 1998, under US accounting standards, it has never reported red ink.

Global vehicle sales for the quarter shrank by 443,000 vehicles from the same period a year earlier to 1.84 million, as sales dropped throughout the world, including North America, Europe, Japan and other Asian nations, it said.

"Both revenues and profits declined severely during this period," Toyota Executive Vice President Mitsuo Kinoshita said of the latest quarter.

Conditions were especially tough in the US and Europe, and the rapid rise of the yen, which reduces the value of overseas earnings, also hurt results, he said.

Toyota also lowered its global vehicles sales forecast by 220,000 vehicles from its December forecast to 7.32 million vehicles.

Kinoshita promised that the company will turn itself around through cost cuts and reshaping its business by coming up new products to meet global demand. He said Toyota continues to be committed to developing gas-electric hybrids as a pillar of its growth strategy.

He pointed to the third-generation Prius, set to arrive at dealerships in May, as well as the HS250h, the first Lexus model designed solely as a hybrid, scheduled for sale midyear, as models symbolizing Toyota's future.

Toyota losses mount, Volvo suffers Q4 loss

TOKYO/PARIS - Toyota, the world's top carmaker, said its losses were ballooning as world car sales drop, while truckmaker Volvo swung to a fourth-quarter loss and Italy readied aid for the ailing industry.

A sudden collapse in consumer demand last year battered automakers who were forced to cut production and shed jobs, leaving the sector and its related industries reeling.

Governments have swung into action, preparing aid packages to help out their struggling car sectors.

The Italian government on Friday approved a decree which included incentives worth more than 1,500 euros for trading-in cars which were more than 10 years old and buying a new one. The total value of the package for the car industry is worth between 1.2 billion euros ($1.5 billion) and 1.3 billion, a government source said.

South African car industry representatives said they had approached the government for loans to help curb job losses.

German's BMW, meanwhile, provided a rare glimmer of hope and its shares rose as it earned a clear profit in 2008 with fourth-quarter sales beating expectations.

Fellow German car manufacturer Volkswagen AG'S January vehicle sales plunged a fifth, according to a source close to Europe's biggest auto maker.

SALES DOWN

Daimler AG said sales of its luxury Mercedes-Benz brand vehicles fell 34.5 percent in January. Sales of the group's compact Smart car rose 3.1 percent year-on-year in the same period.

Toyota Motor Corp's operating loss for the year to end-March would be 450 billion yen ($5 billion), three times the loss it had forecast just six weeks ago. Its sales fell 34 percent last month in the United States, its biggest market.

"This is absolutely awful. The earnings situation has obviously deteriorated since last October when the company's stock price plunged," said Yoshinori Nagano, chief strategist at Daiwa Asset Management in Tokyo.

The Japanese firm has already let most temporary workers go and could cut full-time jobs in Britain and North America, a company source said.

Predicting further pain for the world auto industry, Moody's Investors cut its credit rating on Toyota for the first time in a decade.

In Europe, world-number two truck maker Volvo said it slipped to a surprise operating loss in the fourth quarter amid plunging demand and warned that key markets were likely to fall further this year. But shares rose on relief the company was still able to generate cash.

Elsewhere U.S. parts suppliers pressed for government aid and as President Barack Obama urged swift passage of a $900 billion stimulus package for the world's largest economy.

The auto supply industry employs more people directly than car manufacturers and is in talks with the U.S. Treasury to secure emergency funding to avoid a wave of bankruptcies.

ACCESS TO LOANS

Auto suppliers have requested some $25 billion in assistance, an amount that would double the U.S. government's commitment to the auto sector at a time when sales are at their lowest since the early 1980s.

"The key now is whether consumers in America will be able to start securing loans again," Daiwa's Nagano said. "Slumping sales due to the dismal state of the economy may be inevitable, but another big problem today is that consumers who can normally get loans can't get them."

Bob McKenna, president of the Motor & Equipment Manufacturers Association, warned that the parts industry has been shut off from credit at a time when orders from automakers are shrinking.

"Without immediate credit availability, an onslaught of supplier company bankruptcies is inevitable in the coming weeks and months, which would have a devastating, long-term effect on the U.S. economy," McKenna said in a statement.

GM itself is restructuring under a $13.4 billion government bailout, and along with Chrysler LLC is racing to meet a Feb. 17 deadline to show U.S. officials they can be made viable after receiving massive public aid.

In South Korea, cash-strapped SUV maker Ssangyong Motor Co secured protection from creditors, but may struggle to revive in the near term or find new owners after it posted four loss-making quarters on plunging sales.

Difficulties with parts suppliers prompted Russian carmaker AvtoVAZ, which is 25 percent owned by Renault, to halt its assembly line indefinitely, Kommersant newspaper said, quoting AvtoVAZ's president.

For a Toyota earnings graphic, please double click on: https://customers.reuters.com/d/graphics/JP_TYTQ30209.gif