Honda logs 4.1% fall in operating profit in quarter ended September 2014

Article by Christian A., on October 29, 2014

Honda Motor Co. Ltd. posted a 4.1-perceng drop in operating profit in the fiscal second quarter ending September 30, 2014 to JPY164.4 billion ($1.52 billion), just below the JPY184.1-billion yen average estimate of 14 analysts surveyed by Thomson Reuters I/B/E/S.

The carmaker is now expecting lower sales for the full fiscal year ending March 2015, citing "tough" competition in Japan and China as well as the impact of recalls on new-model development. Honda lowered its sales forecasts for Japan and China by 100,000 vehicles each and is now expecting to sell 4 percent less vehicles globally to 4.620 million units.

Honda slightly lowered its revenue forecast to JPY12.75 trillion from JPY12.80 trillion that should result to JPY770 billion in operating profit. The operating profit is expected to remain the same despite lower sales and revenue thanks to a weak yen that renders Japanese exports more affordable.

The carmaker, however, is seeing lower net profit (-5.8 percent) for the full fiscal year to JPY565 billion. Honda was recently named a defendant in a proposed class-action lawsuit over recalls of vehicles fitted with air bags produced by Takata Corp.

Four deaths have been linked to the flawed airbags in the vehicles, all of which are Honda models. Honda has already recalled the car in question – a hybrid version of the Honda Fit – in five separate times in just a year since rolling its out.

Honda chief executive Takanobu Ito as well as 12 other executives took pay cuts to take responsibility for the matter. Honda Executive Vice President Tetsuo Iwamura disclosed that as a result of Fit recall, Honda has to commit to a full inspection of all the upcoming models in the pipeline – leading to 80,000 fewer vehicles sold in Japan this current fiscal year ending March.

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