Just days after its rival, Toyota, projected it would see a huge plunge in profits as the result of the March 11 Japanese earthquake, Honda Motor Co. says it also will take a devastating hit to its bottom line, with earnings for the current fiscal year likely to plunge by 63.5%.Honda – like Toyota – delayed its forecast for the fiscal year running through March 2012 while it assessed the impact of the earthquake and subsequent tsunami, which shut down most of its home market production for a month.
News You Can Use!
Honda now expects to have most of its factories back up to speed sooner than initially anticipated, but several key operations, including the plants producing the critical new 2012 Civic, will be operating below capacity until autumn.
Honda anticipates the current fiscal year will see profits of 195 billion yen ($2.4 billion), down by nearly two-thirds from the 534 billion yen recorded during the fiscal year that ended last March 31.
The maker puts most of the blame on the March 11 natural disaster, which not only impacted production but also ran up billions of yen in unanticipated repairs to Honda plants and other facilities. The company was the only Japanese automaker to report an on-site fatality during the earthquake, a worker at the Tochigi technical center killed when a wall collapsed upon him.
“Honda was deeply hurt” because it operates so lean it couldn’t make up for losses suffered during the disaster, analyst Koji Endo, Tokyo’s Advanced Research Japan, told the Associated Press. “This is going to take awhile.”
Other factors that will negatively impact Honda’s projected earnings include rising raw materials costs as well as the weak U.S. dollar – though the maker’s large production base in the States helps minimize the effects of lopsided exchange rates.
(Toyota, with a larger home market production base, is being especially hard hit by the weak dollar. Click Here for more.)
But the March disaster has curtailed Honda’s production at both home and foreign-based plants, Honda predicting it will see global sales slip to 3.3 million for the fiscal year as a result – a 6% decline from the prior year’s 3.51 million. Revenues, meanwhile, are projected to dip 7.1%, to 8.3 trillion yen, or $104 billion.
Like Toyota, Honda plans to begin making up some of its lost production in the months ahead. But the timing of the disaster will make it difficult to recover completely. Ongoing product shortages have meant that Honda could not take full advantage of shifting consumer sentiments – especially in the U.S. – triggered by soaring fuel prices.
The maker was short of a number of its smaller, more energy-efficient models, including the Fit and its various hybrid-electric vehicles. It also lost momentum with the critical launch of the next-generation Civic, traditionally one of the best-selling models in the compact segment.
Toyota last week projected its fiscal year profits would fall by a third, to 280 billion yen, or $3.5 billion. Nissan has also delayed its earnings forecast but is expected to release that report prior to the company’s annual shareholders meeting on June 29.
Honda Forecasts 63% Drop in Profits
