Hino Motors Proceeds with Asset Liquidation Amidst Restructuring Efforts

Hino Motors Initiates Major Asset Sale Following U.S. Parts Business Withdrawal

The Japanese commercial vehicle manufacturer, Hino Motors (TSE:7205), has commenced the liquidation of machinery and equipment from its now-shuttered 510,000-square-foot manufacturing facility in Marion, Arkansas. This extensive sale, managed by Maynards, marks a critical step in Hino's strategic withdrawal from its U.S. automotive parts business, a decision driven by persistent unprofitability.

Details of the Marion Facility Closure and Asset Liquidation

The Marion, Arkansas plant, which began production in October 2006 and employed approximately 1,300 individuals as of March 2024, specialized in producing rear axles, knuckles, and suspension components for light vehicles. The decision to cease operations and withdraw from this segment was finalized by Hino's Board of Directors on May 31, 2024, citing the inability to achieve sustainable profitability. For the fiscal year ending March 31, 2024, the parts business at the Arkansas plant recorded an operating loss of ¥29.5 billion (approximately $189 million at current exchange rates), contributing significantly to the company's consolidated operating loss. The facility is scheduled for full closure by the end of 2027.

The asset sale features a comprehensive array of modern, late-model automotive production equipment, with much of it installed and operational between 2022 and 2024. Key assets include:

• Over 360 robots, featuring more than 265 Fanuc robots (2020–2024 models) and 80 robotic welding cells.
• 27 late-model CNC machining and turning centers, including Okuma MA-500H II horizontal machining centers and Haas vertical machining centers.
• Major press lines, such as a 2,810-tonne Hitachi Zosen Fukui transfer press and a 1,461-tonne blanking press.
• Advanced inspection and quality control systems from Zeiss, Mitutoyo, and Marposs.
• Specialized equipment like Ajax Tocco induction heaters (2023–2024) and Anderson-Cook shaft spline rollers (2023).

Market Reaction and Hino's Valuation

The market's response to Hino's ongoing restructuring has been notably subdued. While the asset sale signals a determined effort to streamline operations, Hino Motors (TSE:7205) shares have seen a mild dip in momentum, with a 0.2% slip in total shareholder return over the past year.

Currently, Hino Motors is trading at a Price-to-Sales (P/S) ratio of just 0.1x. This figure stands in stark contrast to its peer average of 0.8x and the wider JP Machinery sector average of 0.7x, signaling deep market skepticism or, potentially, overlooked value. Analysts estimate a fair P/S ratio closer to 0.7x, suggesting substantial room for a re-rating if Hino can demonstrate a credible path to improvement. However, persistent net losses, particularly a significant loss attributable to owners of parent of ¥217.753 billion for FY2025 (ending March 31, 2025), and sluggish revenue growth continue to weigh heavily on investor sentiment. The ultra-low P/S ratio indicates that the market is assigning minimal value to each yen of the company's revenue, likely reflecting concerns about future profitability and the efficacy of its turnaround strategy. A Discounted Cash Flow (DCF) model pegs Hino's fair value closer to ¥566.48, while shares currently trade around ¥371.1, indicating a theoretical discount that nonetheless underscores perceived business risks.

Broader Context and Industry Implications

The closure of the Marion facility, despite housing highly modern and specialized equipment, underscores a significant strategic pivot for Hino Motors. The company aims to re-focus its efforts on its core commercial truck operations in the United States. This move suggests a consolidation of manufacturing footprint and a potential shift away from certain component production lines.

The availability of such advanced automotive production equipment on the market, as highlighted by Robert Levy, President Global Strategies, Maynards Group of Companies, who stated, "this sale represents one of the most significant opportunities in recent years to acquire late-model automotive production equipment," could have broader implications for the automotive supply chain. Other manufacturers in the automotive, robotics, precision machining, and heavy manufacturing sectors may seize this opportunity to acquire cutting-edge technology, potentially enhancing their own efficiency and production capabilities. This dynamic reflects an an evolving landscape within automotive manufacturing, driven by shifts in demand, technological advancements, and regional economic factors.

Looking Ahead

Investors will be closely watching Hino Motors' ability to execute its restructuring plan and demonstrate a return to sustainable profitability within its core commercial truck business. The company's financial results for FY2025 indicated an increase in consolidated net sales to ¥1,697.229 billion (up 11.9%) and a positive operating income of ¥57.490 billion, reversing the previous year's loss. However, these gains were overshadowed by a substantial ¥258.413 billion loss related to North American certification issues, resulting in a significant net loss for the year.

The company projects a decline in future sales and profit, citing a downturn in the overseas market and yen appreciation. Hino has also announced that it will not pay a year-end dividend for FY2025 due to negative retained earnings. The market will require clear evidence of a successful strategic refocus and consistent operational improvements for Hino's valuation to potentially align more closely with its intrinsic worth.