Honda recently confirmed plans to add the HR-V - shown in concept form - to its line-up.
Honda profits surged during the July-to-September quarter, but the third-largest Japanese automaker nonetheless lowered its full-year forecast reflecting a variety of potential problems ahead.
Helped by a weak yen, Honda Motor Co. reported net earnings of 141.8 billion yen, or $1.3 billion, for the second quarter of the Japanese fiscal year. Sales, meanwhile, increased by 4%, to 3.015 trillion yen, or $27.9 billion.
Honda is among the Japanese makers to benefit from a weak yen which it credited for boosting revenues by 123 billion yen, or $1.1 billion during the latest quarter. But that exchange rate enhancement isn’t expected to continue, industry analysts warn, while Honda warned it faces a “difficult business environment” that includes sluggish demand in Asia.
It could also run into additional problems due to its long-standing ties to troubled Takata Corp. Honda has been one of the Japanese airbag manufacturer’s biggest customers and is facing significant costs connected to Takata’s recall woes. So far, more than 16 million vehicles sold around the world have been targeted by service actions due to Takata airbag defects, 7.8 million in the U.S., and some critics believe that number should be substantial increased.
(Critics demand end to limited “geographic recalls;” could impact millions more vehicles using Takata airbags. Click Here for the story.)
“We are reviewing our ties with Takata in terms of quality and supply,” Tetsuo Iwamura, Honda’s executive vice president overseeing North American operations, said at a news conference in Japan today.
Honda has not revealed how much it already expects to spend to make repairs related to those Takata airbags, but complicating the company’s problems, it has been named, along with the supplier, in a new lawsuit filed in U.S. District Court in Florida seeking class action certification. Meanwhile, the National Highway Traffic Safety Administration is investigating an apparent failure by Honda in reporting fatal injuries related to possible safety defects. NHTSA has been increasingly aggressive in fining automakers for such breaches.
(Honda cuts executive pay after Fit recall. Click Here for details.)
But Honda has other problems that it says will likely impact its bottom line in the months ahead. Sales have been slipping in both Japan and China, for one thing. That led the Tokyo-based maker to reduce the forecast for its full fiscal year – which ends next March 31 – from 600 billion yen to 565 billion, or $5.2 billion at the current exchange rate.
Japanese auto sales, in general, have been slumping as a result of a big sales tax increase that went into effect in April, at the start of the current fiscal year. Many motorists rushed to buy vehicles before then, inflating the prior year’s earnings for domestic Japanese makers.
China, meanwhile, has seen a significant slowdown in its economy in recent months, though car sales are still expected to grow by 6% or more for all of 2014. Japanese makers are struggling to regain ground they lost due to a nasty political dispute several years ago.
Meanwhile, Honda saw sales slip a bit in the U.S. during the July to September quarter.
The overall result, Honda forecast, is that global vehicle sales will come to just 4.6 million for the current fiscal year, down from the original target of 4.8 million. That would still be a roughly 6% increase over last year’s 4.3 million.
(New Honda Fit named Green Car of the Year finalist. Click Here for the rest of the list.)