By Chang-Ran Kim
MAKUHARI, Japan, Oct 29 (Reuters) - Japanese truckmakers will showcase their latest achievements in green technology at the Tokyo Motor Show this week, hoping to attract attention at a time when stricter emissions standards are coming into effect.
But the crucial question hanging over half of the players may not be how to survive in the race to make ecologically friendly cars, but how to survive at all.
Truck demand in Japan has shrivelled over the past decade as the nation's economic problems have slashed demand for freight, while construction firms are in the throes of a major shake-out as the government cuts back on public works projects.
Yet in a market that has more than halved to around 70,000 from the peak years, four major makers continue to operate. Nissan Diesel Motor Co and Isuzu Motors Ltd , considered the weakest of the lot, do so under the pressure of huge interest-bearing debts and dire cash-flow levels to boot.
Thanks to the new regulations requiring lower nitrogen oxide emissions, the division between winners and losers will become much clearer, the chief operating officer of Mitsubishi Motors Corp predicted.
"For us and for Hino Motors, our major customers are big companies with the wherewithal to switch to the new products," Takashi Usami said on the sidelines of the auto show, which will run for five days starting on Wednesday.
"The smaller users, frankly, are wondering whether to make the costly switch-over or get out of the transport business altogether." If those users decide to quit, that would deal a blow to the smaller truckmakers, Usami said.
The presidents of Nissan Diesel, Isuzu and Hino declined to be interviewed.
WINNERS AND LOSERS
Mitsubishi Motors' Fuso truck unit, which will be spun off in January, has the added benefit of a close equity partnership with DaimlerChrysler AG , the world's biggest truckmaker, which allows it to tap into its technology and global sales channels among other perks.
Hino Motors Ltd , majority owned by Toyota Motor Corp , has also flexed its muscle by signing a cooperation deal this year with Sweden's Scania AB , which ranks third in the world in the market for large trucks with a payload of over 16 tonnes.
Scania is unveiling this week its first vehicle to be sold in Japan bearing both its own and Hino's logo.
The Swedish truckmaker's entry into its only untapped market apart from North America would make life even more difficult for the weaker players if it grabs a significant portion of the large truck segment as planned.
While both Isuzu and Nissan Diesel have capital alliances with foreign makers -- Isuzu with General Motors Corp and Nissan Diesel with Renault SA -- analysts have all but given up on Isuzu and Renault's participation in Nissan Diesel's business is minimal.
While Isuzu is known for its prowess in diesel technology and succeeded in persuading its main shareholders to extend it financial aid last week, analysts said there was little to be optimistic about.
"While we believe Isuzu has the support of its banks for the time being, the substantial challenges still ahead cause us to leave our rating unchanged at underweight," Steve Usher, senior analyst at JP Morgan wrote in a report.
Isuzu's shares are at 40 yen, off a year high of 104 yen and well into levels considered as carrying huge investment risks.
Usher noted that even under Isuzu's ambitious debt and profit targets over the three years to March 2005, its debt-to-equity ratio would remain a massive 495 percent.
Nissan Diesel, whose shares are also in the two-digit danger zone at 82 yen, will need more than a fresh logo -- unveiled to the press on Tuesday -- to build a case for profitable growth.
After eking out a slight profit rise last year mainly through cost cuts, Nissan Diesel has said the only way for it to improve profits is through a rise in sales -- a major challenge in the current economic doldrums.