Isuzu's Crush on the U.S.

• Email
• Share
• Print

I'm not sure if it's Isuzu (OTC BB: ISUZY.PK) that has a crush on the U.S. or vice versa. The company announced that it has purchased land in Alabama that is expected to be for a manufacturing facility.

Multiple Japanese newspapers are reporting that while nothing is final, the company expects to be making vehicles at the facility by 2010, and maybe even 2009. Given the expense of building a plant, it's safe to assume that Isuzu expects to increase its U.S. sales in the future.

Last year saw General Motors (NYSE: GM) sell its stake in the company and Toyota Motors (NYSE: TM) pick up a 5.9% stake. Toyota also picked up a stake in Fuji Heavy Industries, another company General Motors decided to abandon ties with. Fuji Heavy potentially brings Toyota access to well-regarded all-wheel drive technology and hybrids using lithium-ion for batteries. Isuzu, on the other hand, brings its diesel technology to the table.

In addition to its future expansion in the U.S., Isuzu has a number of other positives for investors to consider. First is the aforementioned diesel technology. Among diesel engine makers, Isuzu is seen as a leader in the field. Second, Isuzu has a strong presence in Southeast Asia, the company's largest market by far and a part of the world likely to continue showing above average growth. The last large item Isuzu has going for it is a much improved balance sheet. A few years ago, the company was severely leveraged with a long term debt-to-equity ratio of more than 700%, but a recovery in sales and a focus on debt reduction has the ratio back under 100%.

Singling out the company early on in its process of repairing its balance sheet would have delivered returns typical of turnarounds, but taking all three items into account, as well as where the company stands now, isn't a bad start to building an investment thesis.

Nathan Parmelee wonders if they'll ever bring Joe Isuzu back again. At the time of publication, Nathan did not own shares in any of the companies mentioned. The Motley Fool has an ironclad disclosure policy.