JAPAN: Honda slashes profit predictions
Honda has said its fiscal year operating income will fall 81.1% year on year and has cut a further 54,000 units of Japanese auto production. It is also delaying the launch of some diesel models in the US and Japan.
At a press conference in Japan on Wednesday, Honda said it was now forecasting net sales and other operating revenue down 13.4% year on year to JPY 10,400bn, operating income off 81.1% to JPY180bn, income before income taxes down 78.8% to JPY190bn and net income off 69.2% to JPY185bn, hugely down from its earlier forecast of a JPY485bn net profit. Income per share is now seen falling 69.2% to JPY101.95.
Okasan Securities auto analyst Yasuaki Iwamoto told Agence France-Presse Honda's revision was even more severe than expected.
"The auto market is in an unprecedented situation which it could not have imagined even a few months ago," he said.
Fiscal year unit sales forecasts are now motorcycles up 10.5% to 10.3m units, autos off 7% to 3.65m units (-7%) and power products down 14.4% to 5.185m.
Calendar year forecasts are motorcycles up 12% to 15.12m units, autos unchanged at 3.77m and power products down 7% to 5.67m.
"The abrupt change involving the global automobile industry from mid-September of this year that was triggered by the financial crisis, forced all the automakers to change various plans over a very short period of time," Honda said in a statement.
"The situation is worsening day by day and is showing no sign of recovery."
Honda said the overall US market had been declining since the second half of the year due to the impact of the credit crunch and is now predicting sales of 1.43m units, down 8% from 2007.
But South America auto sales are expected to rise 34% to 157,000 units.
Noting that the financial crisis has accelerated to involve growing markets in eastern Europe and Russia, Honda is expecting 2008 sales up 1% to 380,000 units.
China sales are predicted to be up 12% to 478,000 units with Japan flat at 622,000.
Honda said all investments and development projects would be reassessed as would bonuses for executives who would also be taking a 10% cut in monthly pay from next month.
Revised projects in Japan include a production start delay of over a year for the new auto plant in Yorii initially scheduled for 2010; a staggered production start at the new engine plant in Ogawa from July 2009 as originally planned; and more than a year's delay in new minivehicle production at a new Yachiyo Industry plant at Yokkaichi initially scheduled for 2010.
Outside Japan, expansion of auto production capacity in some countries including India, initially scheduled for 2010, and Turkey, initially scheduled for mid- 2009, will be delayed indefinitely.
"While making global production adjustments, Honda will make a thorough effort to mature its flexible production system to establish a company structure which enables [us] to get through anticipated future changes with minimal impact," the company said.
Production of the Stream will be transferred from Suzuka to Saitama next month while production of the US and Canada version of the Fit (Jazz) will also start in Saitama from next spring in addition to production in Suzuka.
In Japan, where demand has shifted toward small-sized vehicles including minivehicles, Honda will strengthen its Honda Cars sales network.
But it has axed plans to introduce the premium Acura brand in Japan around 2010.
The development of the V10 NSX sportscar replacement has been cancelled and the start of operations at the new R&D Centre in Sakura, was scheduled to become fully operational in 2010, has been delayed.
Honda has previously announced its withdrawal from Formula One, making 2008 its last season.
The automaker said it would concentrate on the development of fuel-efficient products, including a battery-powered motorcycle.
"The keys to achieve this goal are advancements of electromotive technologies including hybrid models as well as motorcycles and small cars," it said.
"Honda recognises hybrid technologies as the most realistic path for CO2 reduction at this moment.
"To effectively utilise fixed resources, Honda believes it is most important to focus all of our energy on hybrids and achieve mass market penetration as soon as possible."
To minimise the impact of raw material prices, which fluctuate based on various external factors, Honda plans build products with a minimal reliance on expensive materials, which will enable it to offer its customers products with stable cost competitiveness.
It is working on a new small car to be positioned below the Fit and plans to introduce it in two to three years.
It will also development small diesel engines but will postpone the introduction of medium to large-size diesel models in the US and Japan.