Honda Motor plans to reduce its cost structure in Japan to be able to break even there using just 70% of its capacity, a top official has said.

Honda last week nearly tripled its annual operating profit forecast to JPY190bn yen (US$2.1b), far above consensus projections and despite lowering its dollar rate assumption to a tougher JPY85 for the second half from JPY90.

Its Japanese operations are expected to stay in the red, but chief financial officer Yoichi Hojo told Reuters Honda was shaving costs on internally developed components and looking for cheaper sources of parts around the world with the aim of erasing the losses even at the current depressed level of production.

"We can't get there right away, but the final step is to become profitable at the current level of production in Japan," Hojo said, adding that the company hoped to get there in two to three years.

Hojo denied some recent media reports Fit (Jazz) production for the US would be transferred there. He told Reuters that, with annual sales of less than 100,000 units in the United States, the car could be built more competitively in Japan, where it is Honda's best-selling model and expertise in manufacturing small cars is high.

Production started recently at Honda's UK plant in Swindon.

Other cost-cutting steps include cutting the number of car models sold only in Japan, where Honda has more than 20 models across total annual sales of less than 700,000 units, Hojo said.

Auto market intelligence
from just-auto

• Auto component fitment forecasts
• OEM & tier 1 profiles & factory finder
• Analysis of 30+ auto technologies & more