By Chang-Ran Kim, Asia autos correspondent

A deepening global financial crisis is promising to exacerbate what had already started off as a difficult year, and executives said its effect could be long-lasting.

Despite having raised its earnings estimates for the April-September first half last week, Mitsubishi Motors said it would miss its original full-year operating profit forecast by 17 percent as sales fall in the United States and Western Europe and growth narrows in the crucial Russian market.

Mazda, which had been expected to overshoot its projections, surprised by lowering its operating profit target by 22 percent to 90 billion yen ($913.5 million) for the year to March 31. That is far lower than a consensus forecast of 126 billion yen in a recent survey of 14 brokerages. It cut its net profit outlook to 50 billion yen from 70 billion yen.

Mazda said it now expects to sell 1.405 million vehicles this year, or 75,000 fewer than had been planned.

"The halving of its operating profit forecast for the second half (to 30 billion yen) underscores just how bad Mazda expects conditions in Europe and its other key offshore markets will be," said Credit Suisse auto analyst Koji Endo, characterizing the results as "awful."

He said Mazda's shares could wipe out their 24.8 percent gain on Thursday in its entirety when trade resumes on Friday.

The Hiroshima-based carmaker's profit warning came despite a change in its currency assumptions to a more favorable 103 yen to the dollar and 152 yen to the euro, from 100 yen and 150 yen.

On Thursday, the dollar was fetching around 98 yen and the euro was near 130 yen.

Mazda has been the target of media reports that one-third owner Ford Motor Co is looking to unload the bulk of its stake in the Japanese firm to raise cash.

Mazda Chief Executive Hisakazu Imaki declined to confirm or deny the reports, saying only that he expected no change in the long-time partners' relationship.

"Mazda and Ford are so close that it's hard to tell where one starts and the other ends," he told a news conference in Tokyo.

DOWNBEAT

Mazda and Mitsubishi joined Honda Motor Co <7267.T> in predicting bigger falls in profits this year.

Tokyo-based Mitsubishi Motors now expects operating profit of 50 billion yen this year, less than half what it made in 2007/08 and down from its initial projection of 60 billion yen. It kept its net profit forecast unchanged at 20 billion yen.

"I see the current situation as an historic financial crisis," Mitsubishi Motors President Osamu Masuko told a news conference.

He said making forecasts for the year ahead was extremely difficult, but he was bracing for much slower growth in Russia, Ukraine and other rapidly motorizing markets that were the pillar of its growth strategy.

Mitsubishi Motors lowered its global vehicle sales forecast by 6 percent to 1.228 million units for this year.

For the July-September quarter, its operating profit rose 21 percent to 15.5 billion yen thanks to big cost cuts and increased sales of higher-margin models. Net profit fell 5 percent to 2.47 billion yen, while revenue dropped 12 percent to 603.9 billion yen.

Mazda's operating profit fell by a fifth to 32.4 billion yen in the second quarter, while net profit dropped 45 percent to 14.5 billion yen. Revenue declined 5 percent to 841.9 billion yen, although vehicle sales rose 2 percent to 343,000 units thanks to brisk sales of the new Mazda2/Demio and Mazda6/Atenza.

Nissan Motor Co <7201.T> will report on Friday and Toyota Motor Corp <7203.T> on November 6.

A day earlier, Toyota's truck subsidiary Hino Motors Ltd <7205.T> reduced its operating profit forecast by two-thirds, blaming a drop in production of vehicles and parts for Toyota in North America.

Toyota's rare setback, centering on shrinking demand for large, gas-guzzling vehicles in the United States, also hit its top supplier, Denso Corp <6902.T>.

Denso, one of the world's biggest parts makers, on Thursday hacked its profit forecast for the second time in three months. It now expects operating profit of 178 billion yen in 2008/09, down from 272 billion yen forecast in July. It cut its net forecast to 101 billion yen from 185 billion yen.

Shares in Mazda have been the worst performer of any Japanese automaker in the past month, punished for the company's vulnerability to a stronger yen since it ships most of its cars sold abroad from Japan. The share price has fallen more than 50 percent in the past month, compared with a 28 percent drop in Tokyo's transport sector subindex. <.ITEQP.T>

Mitsubishi Motors' shares fell 31 percent in the same period.

On Thursday, Mazda soared 25 percent to 247 yen, and Mitsubishi Motors rose 8.2 percent to 132 yen, lifted by the yen's sharp drops against the dollar and euro. The sector rose 12 percent.

($1=98.52 Yen)

(Additional reporting by Yumiko Nishitani; Editing by Hugh Lawson)