Isuzu Motors Ltd. (7202) and Hino Motors Ltd. (7205) are believed to have each generated operating losses of around 20 billion yen on a consolidated basis for the April-June quarter as a result of anemic truck sales.

While the figures would be mostly in line with their preliminary projections, they would represent the first quarterly losses for the companies since they began compiling such data. Because sales at Isuzu and Hino rely heavily on corporate capital investment, especially in the transport and construction industries, their earnings take longer to bottom out than automakers such as Honda Motor Co. (7267), which cater to the passenger car market.

Tanking sales in their mainstay truck operations are mainly to blame for deteriorating earnings at Isuzu and Hino, whose sales are likely to have dropped 50% on the year to around 200 billion yen and roughly 160 billion yen, respectively. Domestic truck sales fell by the same pace, with Isuzu selling around 6,000 vehicles and Hino roughly 4,000 units.

In particular, high-profit-margin midsize and large trucks suffered conspicuous sales declines. Sales to emerging markets in Asia as well as Central and South America also fell on the year.

Another drag on earnings was the robust yen. Both companies saw the currency strengthen beyond their assumed rate of 95 yen against the dollar, weighing down profit by several billions of yen. And the effects of price cuts for steel materials are now expected to be reflected until the July-September quarter or beyond. As a result, Isuzu and Hino were unable to offset the yen's appreciation by cutting costs.

For the full term ending March 31, 2010, Isuzu expects an 18 billion yen group operating loss, while Hino projects a 15 billion yen operating loss. The truckmakers are likely to keep these forecasts unchanged when they release their April-June quarter results later this month or in early August.