Enlarge imageBy Michael Shields and Chang-Ran Kim
FRANKFURT/TOKYO (Reuters) - General Motors' shock decision to scrap the sale of its Opel unit, along with raised forecasts from Japan's Nissan Motor Co, indicates increasing confidence in the global auto industry's recovery.
But, in a major blow to Formula One motor racing, Toyota Motor Corp announced on Wednesday it was quitting the costly sport after failing to win a single race.
An unprecedented year of turmoil has reshaped the auto industry and those relying on it, but at least one major shake-up will now not go ahead.
After months of negotiations, General Motors has abandoned the sale of Opel to a group led by Canada's Magna, saying improving business conditions and the strategic importance of Opel had prompted the decision by its board.
Advertisement starts
Advertisement ends
German union and government officials reacted with anger and frustration after agreeing to jobs concessions and billions of euros in assistance to support the sale plan.
Opel's labour leader, Klaus Franz, said the unions would not give in to GM's "blackmail" to help finance its plans, while Economy Minister Rainer Bruederle branded GM's behaviour over the future of Opel as "totally unacceptable."
ON THE MEND
Automakers around the world have struggled to cope with plunging demand brought on by the global financial crisis, which helped send GM and rival Chrysler into bankruptcy earlier this year.
But a range of government measures to attract buyers has helped revive sales and many automakers have begun raising their forecasts.
Nissan, Japan's No.3 behind Toyota and Honda Motor Co, beat expectations with its second-quarter results and raised its full-year forecast, banking on reducing costs and better sales in China.
Nissan, 44 percent-owned by Renault SA, expects an operating profit of 120 billion yen (786 million pounds) in the year to end-March, instead of the 100 billion yen (665 million pound) loss it had forecast.
"It's a strong showing, demonstrating both Nissan's ability to manage through the economic crisis as well as the returns from its investments in emerging markets, particularly China," said Marc Desmidt, COO Asian equities, at BlackRock.
"Having said that, an important factor to watch out for is the sustainability of consumer demand as government stimulus around the world begins to come to an end."
SHARE BOOST
Nissan's solid results, after the market close in Tokyo, boosted Renault and other European automakers, which bounced back from a 14 percent sell off over the past two weeks.
"Both Nissan's outlook and last night's U.S. figures are indications that things are getting better for automakers," a Paris-based trader said.
U.S. auto sales hit an annualized rate of 10.46 million units in October, figures from industry tracking firm Autodata showed on Tuesday.
That is a level not seen in a year, except for July and August when the U.S. government's "cash for clunkers" incentives scheme sparked a surge in sales.
COST CUTS KEY
Still, Japanese automakers are relying on cost cutting rather than any lasting surge in sales.
Toyota had an estimated annual budget of around $300 million (181 million pounds) for its Formula One team, which has never won a race since entering the series in 2002. It finished fifth out of 10 teams in this year's F1 constructors' rankings.
Honda, which quit the F1 series last December, said on Wednesday it was aiming to break even in Japan using just 70 percent of its capacity to build cars.
Honda last week nearly tripled its annual operating profit forecast for the year to March to 190 billion yen (1.27 billion pounds), far above consensus projections and despite lowering its dollar rate assumption to 85 yen for the second half from 90 yen.
Honda's Japanese operations are expected to stay in the red, but Chief Financial Officer Yoichi Hojo said Honda was shaving costs on components with the aim of erasing the losses even at the current depressed level of production.
"We can't get there right away, but the final step is to become profitable at the current level of production in Japan," Hojo told Reuters in an interview, adding the company hoped to get there in 2-3 years.
(Additional reporting by Yoshifumi Takemoto and Alastair Himmer in TOKYO and Noah Barkin in BERLIN; Writing by Lincoln Feast; Editing by Ian Geoghegan)
