Honda Lowers Earning Forecasts as Recalls Push Profit Down

By YURI KAGEYAMA | February 3, 2015

Honda Motor Co., the Japanese automaker at the center of an airbag defect scandal, lowered its annual earnings forecast Friday, after quarterly profit slipped 15 percent due to recall expenses.

The Tokyo-based manufacturer of the Odyssey minivan, Fit subcompact and Asimo robot recorded a 136.5 billion yen ($1.16 billion) profit for the three months through December 2014, in line with forecasts by analysts.

Honda said it was hurt by recall expenses, mainly in North America. Honda is the automaker hardest hit by the quality woes over Takata Corp. airbags that explode. It relied on that Japanese supplier most heavily.

The company now expects a profit for the fiscal year through March of 545 billion yen ($4.6 billion), down from its previous forecast for 565 billion yen ($4.8 billion). That would mark a 5 percent drop from the profit reported the previous fiscal year.

Honda also lowered its global vehicle sales forecast for the full year to 4.45 million vehicles from 4.6 million.

The less optimistic forecast is still better than the 4.3 million vehicles Honda sold around the world the previous fiscal year.

The massive quality problem at Takata centers on air-bag inflators that can explode with too much force, blowing apart a metal canister and sending fragments into the passenger compartment.

U.S. and Japanese authorities have been investigating the Takata air bags. The U.S. fined Honda $70 million, which was the largest civil penalty levied against an automaker, for not reporting to U.S. regulators some 1,729 complaints that its vehicles caused deaths and injuries, and for not reporting warranty claims.

A blessing for Honda has been the cheap yen engineered by easy money “Abenomics” policies of Japanese Prime Minister Shinzo Abe. A cheap yen helps all Japanese exporters, including Honda.

Honda was counting on the dollar costing 114 yen for the quarter, up from 100 yen the same period the previous year.

Quarterly sales jumped nearly 9 percent to 3.29 trillion yen ($27.9 billion).

Honda has a healthy motorcycles division, especially in Asia. Motorcycle sales were up 4 percent in volume terms from a year earlier.

In Japan, Honda suffered a slowdown in sales after sales tax was increased in April.

Quarterly vehicle sales were up in other key regions, including the U.S., Europe and the rest of Asia.

Was this article valuable?

Here are more articles you may enjoy.