Tokyo: Honda Motor Co expects improving sales to return its car business to profitability in the second half even without the support of its robust financial services division, a top executive said on Wednesday.
Honda, Japan’s No.2 automaker, posted an unexpected profit for the April-June first financial quarter last week thanks to a ¥46.8 billion ($491 million) boost from its financial services business, which benefited partly from lower interest rates.
“We’re expecting to sell just short of 100,000 more cars in the second half (than in the first), so that would result in a profit,” chief financial officer Yoichi Hojo told Reuters in an interview.
Losses from a stronger yen assumed for the October-March second half would offset the absence of restructuring costs in that period, but better vehicle sales would have a net positive impact, he said.
Last week Honda lifted its forecast for car sales in the business year to next March by 85,000 vehicles to 3.295 million, projecting better demand in Japan but weaker sales in Europe and the United States. Globally, Honda is using about 80% of its production capacity, Hojo said.
Honda, also the world’s top motorcycle maker, raised its operating profit forecast to ¥70 billion from ¥10 billion.
Honda now expects the overall US market to total 10 million vehicles in 2009, down from its previous estimate of 10.5 million despite an increasing likelihood that a “cash for clunkers” auto sales incentive would be extended by another $2 billion.
“We just don’t know how this is going to affect us, or how long it will last,” Hojo said, adding that the first $1 billion in rebates mainly helped Ford Motor Co.
Honda lowered its annual North American sales forecast by 50,000 to 1.30 million vehicles, without factoring in any sales boost from the scrappage scheme.
While the rebate programme could ultimately result in higher US sales than Honda expects, Hojo said it could also negatively affect profit margins if it forces manufacturers to offer their own incentives to stay competitive.
Honda now intends to spend about ¥30 billion ($315 million) more in sales incentives in the United States than it had planned three months ago, mainly to sell off 2009 model year passenger cars such as the Civic and Accord.
HondaJets To Be Delayed
Government stimulus measures are also helping to mitigate a freefall in Western European sales, but the outlook for demand is still uncertain due to the economy’s weakness, Hojo said.
Separately, he said demand was similarly fragile in the corporate jet business, leading to some cancellations recently for Honda’s first aircraft, the HondaJet light jet. Honda has received orders for some 100 HondaJets to date, he said.
The need to save on labour and other costs was also forcing Honda to delay the timetable for delivery by one year to the end of 2011, Hojo said.