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Reporting its third-quarter earnings fell by
nearly a quarter as it soaked up recall costs, Japan's
third-largest automaker said it now expects an operating profit
of 720 billion yen ($6.1 billion) for the year to March 31.
It previously forecast 770 billion yen, but has set aside an
extra 50 billion yen to cover what it said were quality-related
costs including the Takata air bag recalls. Still, Honda's
Executive Vice President Tetsuo Iwamura said, "We are not seeing
a big impact on sales in North America from the air bag issue."
In the three months ended December, Honda said operating profit
skidded 22.5 percent to 177.2 billion yen from 228.57 billion
yen in the same period a year earlier. That was below the 189.11
billion yen forecast by Thomson Reuters SmartEstimate from a
poll of 10 analysts.
Honda also said it now expects to sell a total of 4.45 million
cars this fiscal year, down from the 4.62 million it previously
forecast, as sales in Japan fall short of its original target.
With new model launch delays and fierce competition in the
domestic small car market, Honda now expects to sell 790,000
cars in Japan this year, 11 percent below the 890,000 it
previously expected.
Speaking at a news conference in Tokyo, Honda's Iwamura said the
impact of lower sales on its earnings will be canceled out by
the beneficial effect of the weaker yen. The slide in the value
of the Japanese currency means sales booked overseas now
translate back into more yen.
Honda accounts for more than half of the Takata-related recall
of about 25 million vehicles since 2008. Takata's inflators can
explode too forcefully and send metal shards into cars, and have
been linked to five deaths, all on Honda's cars.
Honda is paying for the voluntary recall of about 4 million cars
in the United States alone. But it expects to get those costs
back if investigations find Takata at fault, and many analysts
say reputational damage from the recalls seems minimal,
including in the United States, Honda's most important market.
Potentially a bigger near-term concern is cheaper fuel as global
oil prices slide, with U.S. sales of light trucks up 10 percent
in 2014 against a 1.8 percent rise for passenger cars. That's a
red flag for Honda, which excels in cars that have attracted
buyers concerned about fuel economy.
"The fall in fuel prices represents a body blow to Japanese
automakers," said Merrill Lynch analyst Kei Nihonyanagi,
speaking before the third-quarter results were published.
($1 = 117.8400 yen)
(Editing by Kenneth Maxwell)
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