Tokyo - Honda Motor, Japan’s third- largest automaker, forecast its first profit decline in three years as deliveries to China and Japan weakened.
Net income will drop 1.6 percent in the year ending in March to 565 billion yen (R57 billion), the Tokyo-based company said in a statement today.
That compares with the 600 billion yen the automaker forecast in April and would mark the first annual profit decline since the fiscal year ended March 2012.
Honda cut its China sales target by 100,000 units to 800,000 this year as demand shrank for key models such as the Accord sedan and CR-V sport utility vehicle.
In Japan, repeated recalls of the automaker’s best-selling model - the Fit compact car - and an increase in consumption tax since April are setting Honda back in its plan of boosting sales by 21 percent this fiscal year.
“The sales volumes are behind what they planned in regions including Japan, China and Thailand,” said Kota Yuzawa, a Tokyo-based analyst at Goldman Sachs.
“If it were not for the weaker yen, it would have been a tough quarter.”
The cut in profit forecast comes as automakers including Honda are rushing to recall millions of cars to fix Takata air bags that can inflate with too much force and fling metal at passengers.
Honda also lowered its prediction for vehicle sales to 4.62 million units from 4.83 million.
Operating Income
Operating income in the second quarter fell 4.1 percent to 164.4 billion yen, missing the 184.9 billion average analyst estimate.
Sales rose 4.3 percent to 3.01 trillion yen.
In China, where Japanese carmakers account for the April- to-June quarter in July-to-September earnings, Honda deliveries rose 1 percent in the first nine months.
The sales of the Accord -- until three years ago the top- selling midsized sedan in China -- slumped as the initial versions of the car were more expensive than Nissan’s Teana and Toyota’s Camry.
Other models, such as the City small car and CR- V SUV, also fell.
In Japan, operating profit rose 22 percent to about 60 billion yen.
Deliveries jumped 13 percent in the quarter, helped by the new Fit and back orders from the rush to buy before an increase in the sales tax rise in April.
Pay Cuts
Honda last week said it will recall 425,825 vehicles, including the Fit, in Japan for flaws in ignition coils and electrical circuits.
The call-back -- the fifth for the Fit and the third for Vezel -- delays the introduction of new models by as long as six months, executive vice president Tetsuo Iwamura said today in a briefing.
Honda will book an additional 5.7 billion yen charge for the latest recall. President Takanobu Ito will take a 20 percent reduction in his monthly pay for three months because of the repeat call backs.
Twelve other executives, including Chairman Fumihiko Ike, will reduce their salaries by 10 percent, the company said last week.
In North America, operating profit fell 15 percent to 38.9 billion yen in the second quarter, while losses narrowed to 7.5 billion yen in Europe.
The carmaker has also recalled more than 5 million vehicles in the US the last two years for flawed air bags made by Takata.
Honda has acknowledged two deaths related to the Takata air-bag defect and is investigating two more.
Takata and Daicel each account for half of the inflators in Honda’s air bags, Iwamura said.
Carmakers expect they will recoup -- at least most of -- the air bag recall expenses from Takata, executives at Nissan and Honda have said. - Bloomberg News