South Korean auto makers take credit crisis action

TOKYO/SEOUL (Reuters) - Two South Korean auto makers on Friday joined the industry line up of companies suffering in the global financial crisis, with Hyundai Motor Co <005380.KS> slashing output and Ssangyong <003620.KS> filing for bankruptcy protection.

Auto makers worldwide are suffering as consumer demand for vehicles plunges in the worst economic downturn since the Great Depression, which is expected to last well into 2009.

Of Friday, Credit rating agency Moody's put Honda Motor Co Ltd <7267.T> on review for a possible downgrade, while Ford Motor Co Chief Executive Alan Mulally said there was little prospect of a turnaround soon.

Mulally warned U.S. auto sales would not see a real recovery until 2010.

Car firms have closed plants, cut jobs and extended holidays to try to clear stocks of unsold vehicles. France's Renault said managing and reducing inventory would remain a priority after 2008 unit sales fell 4.2 percent.

At BMW , vehicle sales fell 4.3 percent in 2008 as a 5.8 percent decline in BMW brand deliveries offset record numbers for its Mini and Rolls-Royce brands.

"The automotive market in every developed market is in recession -- particularly since October 2008 -- which Moody's believes will persist through 2009 and beyond," the agency said as it reviewed Honda's Aa3 debt rating.

Last month, Honda cut its annual operating profit forecast by 67 percent to 180 billion yen ($2 billion) in its third profit warning this business year.

Demand was also slowing and possibly declining in some emerging markets, Moody's said, evidenced by sluggish growth in Chinese auto sales released on Friday.

Meanwhile, Hyundai -- the world's fifth largest auto maker -- plans to cut production at its domestic plants by 25 percent to 30 percent in the first quarter to offset a slump in demand.

Ssangyong, the smallest of South Korea's five automakers, filed for receivership.

SALES SLIDE CONTINUES

Auto sales in the United States, the world's biggest market, plunged 36 percent in December as the battered industry closed its weakest year since 1992, while sales in Japan slid 22 percent to their worst on record for the month.

Ford is the healthiest of the Big Three U.S. carmakers, yet its U.S. sales fell about 20 percent in 2008 and it posted $8.7 billion in losses through the first nine months of last year.

"We think that the economy is going to continue to contract, at least in the first two quarters," Mulally told reporters at the U.S. Consumer Electronics Show in Las Vegas.

Rival General Motors Corp , which won a $13.4 billion federal bailout to avoid collapse, said on Thursday it was confident it would win concessions from its main union to meet the conditions of its rescue package.

GM said on Friday that European unit sales fell 6.5 percent in 2008 in a market that was down 5 percent, although the sales remained above two million units for the third year running.

At one stage, the industry had hoped emerging markets would ride to the rescue, but the sales slide is spreading.

Vehicle sales in Indonesia, Southeast Asia's biggest economy, are likely to fall 30 percent this year, due to tight domestic liquidity and slower economic growth, Toyota's distributor, PT Toyota Astra Motor, said.

"Liquidity in the market has gone, or is very, very limited," said Johnny Darmawan, president director of Toyota Astra, in an interview on Indonesia's Metro TV.

In a rare piece of good news, Volkswagen said its China subsidiary set a new record with sales of over one million cars in 2008, but it remains uncertain of the market in 2009.

Governments have pledged their support for an industry that in Europe employs 2.2 million people directly and a further 10 million in related industries and services.

In France, the finance ministry is hosting a forum on January 20 uniting ministers with automakers and components suppliers to discuss what must be done to support the flagging industry.

Renault head of sales Patrick Blain said on Friday that maintaining liquidity would be an "absolute priority" for 2009, along with the ongoing drive to reduce inventories.

"The financing needs of a group like Renault add up to around 9 billion euros ($12.31 billion) a year. We'll knock on every door if we need to and we expect the state to help us to find liquidity," Blain told journalists.

(Additional reporting by Alastair Himmer in Tokyo, Anupreeta Das in Las Vegas and Harry Suhartono in Jakarta, with Michael Shields in Frankfurt and Helen Massy-Beresford and Matthias Blamont in Boulogne-Billancourt; Editing by Lincoln Feast and David Holmes and Andrew Macdonald)

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