Honda slashes forecasts as auto turmoil deepens
Honda Motor Co. on Wednesday slashed its profit forecast by more than half for this year and put off production plans at home and abroad as the economic crisis takes a heavier toll on the auto industry.
Japan's second-largest automaker, revising down its projections for the third time this year, also said it would slash 450 more jobs by early February after eliminating 760 positions this month.
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The global credit crisis has been brutal to global automakers, with two of the US Big Three on the verge of collapse. Japan's Toyota Motor Corp. and Nissan Motor Co. also said Wednesday they were trimming production.
"The global automobile market is rapidly shrinking," Honda president Takeo Fukui warned at a news conference.
"In this rapidly changing environment, we need to review investment and development plans and make choices to keep the impact on profit as small as possible and to concentrate limited resources on the right places," he said.
Honda said it now expects a net profit of 185 billion yen (2.08 billion dollars) for the year to March, sharply down from its earlier forecast of a 485 billion yen net profit.
Honda earlier this month announced a shock pullout from Formula One, saying it could not stay in the prestigious racing tournament due to the dire state of the global economy.
It said Wednesday it is freezing more projects, including the planned release in Japan in 2010 of its luxury Acura model which was a hot seller in North America when the market there was strong.
Honda, a pioneer of environmentally friendly cars, said it was also suspending the opening of a new research and development facility and two new plants. All three were supposed to open in 2010 across Japan.
It put on hold plans to ramp up production in Turkey next year and in India the year after. The company's board members each cut their salaries by 10 percent.
Honda shares tumbled 4.2 percent to 1,891 yen ahead of the profits announcement, despite gains on Tokyo's benchmark Nikkei index.
Yasuaki Iwamoto, an auto analyst at Okasan Securities, said 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.
Japanese automakers fear they will become less competitive due to a soaring yen, which on Wednesday rose to a 13-year high against the dollar.
While the stronger yen is a serious factor, "the real problem for automakers is that they are now suffering a sharp decline in sales, which are of course the pillar of their earnings," Iwamoto said.
"People used to say that a slump in developed countries can be covered by earnings in developing countries. But that scenario has completely collapsed. No regions can now expect gains in sales," he said.
Honda no longer expects to meet its goal of selling a symbolic figure of four million cars around the world in the year to March 2009.
It now expects to sell 3.65 million cars, a slump of 275,000 from the previous financial year. In North America, sales are expected to tumble by 14.1 percent.
Nissan, Japan's third largest automaker, said separately that it would reduce output by 78,000 cars this financial year, eliminating 500 temporary-contract jobs.
With the cuts, Nissan in Japan will no longer have any contract workers, who have borne the brunt of the growing number of job cuts in the country.
Japan's top automaker Toyota said it will halt operations of its domestic plants for three days in January.
The shutdown is meant to "flatten the level of production while keeping employment," Toyota spokesman Hideaki Homma said.
Standard & Poor's said it was reviewing Toyota's long-term credit ratings.
While Toyota "has been the most successful automaker globally the company is not immune to the weakening state of worldwide auto markets," the ratings agency said in a statement.
Honda Motor Co. on Wednesday slashed its profit forecast by more than half for this year and put off production plans at home and abroad as the economic crisis takes a heavier toll on the auto industry.
Japan's second-largest automaker, revising down its projections for the third time this year, also said it would slash 450 more jobs by early February after eliminating 760 positions this month.
ADVERTISEMENT
The global credit crisis has been brutal to global automakers, with two of the US Big Three on the verge of collapse. Japan's Toyota Motor Corp. and Nissan Motor Co. also said Wednesday they were trimming production.
"The global automobile market is rapidly shrinking," Honda president Takeo Fukui warned at a news conference.
"In this rapidly changing environment, we need to review investment and development plans and make choices to keep the impact on profit as small as possible and to concentrate limited resources on the right places," he said.
Honda said it now expects a net profit of 185 billion yen (2.08 billion dollars) for the year to March, sharply down from its earlier forecast of a 485 billion yen net profit.
Honda earlier this month announced a shock pullout from Formula One, saying it could not stay in the prestigious racing tournament due to the dire state of the global economy.
It said Wednesday it is freezing more projects, including the planned release in Japan in 2010 of its luxury Acura model which was a hot seller in North America when the market there was strong.
Honda, a pioneer of environmentally friendly cars, said it was also suspending the opening of a new research and development facility and two new plants. All three were supposed to open in 2010 across Japan.
It put on hold plans to ramp up production in Turkey next year and in India the year after. The company's board members each cut their salaries by 10 percent.
Honda shares tumbled 4.2 percent to 1,891 yen ahead of the profits announcement, despite gains on Tokyo's benchmark Nikkei index.
Yasuaki Iwamoto, an auto analyst at Okasan Securities, said 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.
Japanese automakers fear they will become less competitive due to a soaring yen, which on Wednesday rose to a 13-year high against the dollar.
While the stronger yen is a serious factor, "the real problem for automakers is that they are now suffering a sharp decline in sales, which are of course the pillar of their earnings," Iwamoto said.
"People used to say that a slump in developed countries can be covered by earnings in developing countries. But that scenario has completely collapsed. No regions can now expect gains in sales," he said.
Honda no longer expects to meet its goal of selling a symbolic figure of four million cars around the world in the year to March 2009.
It now expects to sell 3.65 million cars, a slump of 275,000 from the previous financial year. In North America, sales are expected to tumble by 14.1 percent.
Nissan, Japan's third largest automaker, said separately that it would reduce output by 78,000 cars this financial year, eliminating 500 temporary-contract jobs.
With the cuts, Nissan in Japan will no longer have any contract workers, who have borne the brunt of the growing number of job cuts in the country.
Japan's top automaker Toyota said it will halt operations of its domestic plants for three days in January.
The shutdown is meant to "flatten the level of production while keeping employment," Toyota spokesman Hideaki Homma said.
Standard & Poor's said it was reviewing Toyota's long-term credit ratings.
While Toyota "has been the most successful automaker globally the company is not immune to the weakening state of worldwide auto markets," the ratings agency said in a statement.
