(Recasts, adds president, analyst comments, background)
By Chang-Ran Kim, Asia auto correspondent
TOKYO, Sept 30 (Reuters) - Japanese truck makerDiesel Motor said on Tuesday that its main banks and major shareholder Nissan Motor would give it 106 billion yen ($957 million) in financial aid to shore up its balance sheet.
The aid -- widely expected after detailed reports of a bail-out had circulated for nearly two weeks -- would helpDiesel focus on improving its core truck-making business, but analysts said the longer-term outlook would depend largely on how the domestic truck market holds up.
Nissan Diesel had been struggling under a pile of interest-bearing debt -- at 390 billion yen, roughly equal to its revenues last year -- left over from the bubble years of the 1980s after which domestic truck demand sank.
"They seem to have escaped the worst stage (with this aid), but we'll need to see where the Japanese truck market goes to determine whether the company's business targets pan out," said Nobuaki Yanachi, analyst at UFJ Tsubasa Securities.
Truck sales have been rising by double-digits since late last year due to replacement demand before the introduction of stricter emissions regulations over the next two years, but analysts say the rise is only temporary.
Demand for trucks is still only a fraction of the 18-19 million units sold annually during the peak bubble years.
Analysts have long said the market is too small for four major truck makers -- Nissan Diesel,Motors Ltd , Motors Ltd and unlisted Fuso Truck and Bus Company.
Under the aid plan, Mizuho Corporate Bank , Mizuho Trust & Banking Co and Resona Bank will swap 90 billion yen of loans to Nissan Diesel for preferred shares. Nissan Motor will provide 16 billion yen by swapping debt and convertible bonds into preferred equity.
Nissan Motor owns 22.5 percent of Nissan Diesel.
OVERSEAS EXPANSION KEY
Outlining a new five-year business plan, Nissan Diesel also raised its revenue forecast for the year to March 2004 by 9.5 percent, citing strong sales in Japan and overseas. But it said it would finish in the red for the year due to special losses associated with the aid package.
The company now expects a net loss of 44 billion yen for the year compared to its previous forecast of a two billion yen profit. Last year it posted a loss of 3.35 billion yen.
"We aim to strengthen our business by continuing to expand overseas, particularly in China and South Africa, and through our joint business operations with Nissan andin China," President Iwao Nakamura told a news conference.
Motor Corp is China's third-biggest vehicle maker.
The aid package would reduce Nissan Diesel's debt to around 240 billion yen by the end of this business year to next March, and to below 110 billion yen by the end of the new business plan in March 2009, the company said. It targeted an operating profit margin of above 5.5 percent within three years, compared with an estimated 4.3 percent this year.
"These are conservative estimates," Nakamura said. "At this level of debt and profit margin, we can become a top-class player in the global truck-making business."
The plan made no mention of 22.5 percent owner, but Nakamura said the French auto maker was "positively considering" reducing its stake in it as requested.
The Nihon Keizai Shimbun reported earlier thathad basically agreed to halve its holding.
Nissan Diesel's shares have quadrupled from an all-time low of 62 yen marked in October, mainly due to the sales surge. Before the announcement they ended up 5.26 percent at 240 yen, compared to a 0.10 percent fall in the Nikkei average . ($1=110.79 yen) (Additional reporting by Yuko Inoue and David McMahon)