GM keeps Opel, Nissan eyes profit as recovery picks up

A woman looks at a car at a Nissan Motor Co showroom in Tokyo in this February 9, 2009 file photo.

FRANKFURT/TOKYO (Reuters) - General Motors' move to scrap the sale of its Opel unit and raised forecasts from Nissan Motor Co lifted confidence in the global auto industry's recovery on Wednesday.

But carmakers were in no mood to take chances and continued to try and push costs lower, with Toyota Motor Corp announcing on Wednesday it was quitting Formula One motor racing after failing to win a single race.

A 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 abandoned the sale of a majority stake in Opel to a group led by Canada's Magna on Tuesday, saying improving business conditions and the strategic importance of Opel had prompted the decision by its board.

GM Europe said that the plan for Opel included a 30 percent cut in fixed costs but declined to comment on possible job cuts and plant closures.

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.

"General Motors' behaviour towards Germany is completely unacceptable," German Economy Minister Rainer Bruederle told reporters.

GM's behaviour showed the "ugly face of turbocapitalism", said Juergen Ruettgers, the premier of North Rhine Westphalia where Opel's Bochum plant lies. Opel labour leader Klaus Franz said the unions would not give in to GM's "blackmail" to help finance its plans and scrapped a deal made on cost savings.

In Russia, Prime Minister Vladimir Putin hinted that the battle for carmaker Opel was not over, saying it was the German trust appointed to oversee Opel, not the board of GM, that should decide any further steps.

ON THE MEND

Automakers worldwide 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 have propped up automakers and many companies have raised forecasts.

In Russia, a high potential market that has been pummelled by the crisis, a source told Reuters that the government could allow France's Renault to buy control of ailing manufacturer AvtoVAZ in which it holds a 25 percent stake.

A Renault spokeswoman said the company would maintain its 25 percent for the foreseeable future, as well as supporting AvtoVAZ with technology, know-how, equipment and platforms.

And in Detroit, Fiat and Chrysler were on Wednesday unveiling a five-year plan to turn around the U.S. carmaker.

Nissan, Japan's No.3 carmaker, which is 44 percent-owned by Renault SA, beat expectations with its second-quarter results and raised its full-year forecast to 120 billion yen ($1.3 billion) profit from the 100 billion yen loss previously forecast, banking on reducing costs and better sales in China.

"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.

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 selloff over the past two weeks.

By 1619 GMT, Renault was up 4.1 percent, while Fiat was up 3.6 percent and Daimler up 3.1 percent.

"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.

Graphic on U.S. auto sales and relative performance of global auto stocks: here

Nissan earnings graphic: here

COST CUTS KEY

Still, automakers are relying on cost cutting rather than any lasting surge in sales.

Toyota had an estimated annual budget of around $300 million 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 ($2.1 billion), far above consensus projections and despite lowering its dollar rate assumption to 85 yen for the second half from 90 yen.

Germany's BMW said on Tuesday it still saw positive 2009 earnings thanks to cost cuts even as it repeated sales volume was set to fall between 10 and 15 percent.

Ford Motor Co is also doing well. The U.S. carmaker on Monday posted a surprise third-quarter profit of nearly $1 billion, defying Wall Street forecasts of a loss.

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(Additional reporting by Yoshifumi Takemoto and Alastair Himmer in TOKYO, Noah Barkin in BERLIN, Blaise Robinson in PARIS and Catherine Bosley in London; Writing by Lincoln Feast and Sitaraman Shankar; Editing by Ian Geoghegan, Andrew Callus and Karen Foster)