Tokyo: Honda on Friday slashed its full-year net profit forecast by 3.5 per cent to $4.6 billion in the face of soaring recall costs from an exploding airbag crisis linked to at least five deaths.
Sales in its domestic Japan and key China market also fell.
The Civic and Accord maker said it now expects a net profit of 545 billion yen for the fiscal year to March, compared with its earlier estimate of 565 billion yen.
In the third quarter, Honda’s net income dropped 15.1 per cent. It pointed to higher “quality-related expenses” as it recalls millions of vehicles due to the defect in supplier Takata’s airbags.
Honda said it cut its projections for the fiscal year to March owing to a “forecast decline in unit sales in Japan and China due to the difficult automobile market environment and a forecast increase in quality-related expenses mainly in North America.”
However, a sharply weaker yen has boosted the bottom line at Japan’s major automakers and Honda’s net profit rose 5.3 per cent to 424.9 billion yen for the nine months through December.
A cheaper yen boosts the competitiveness of Japanese exporters and inflates their repatriated overseas profits, although the effect has been waning in recent months, analysts say.
Sales for the nine months rose 6.3 per cent to 9.3 trillion yen, while operating profit fell 7.7 per cent to 539.7 billion yen.
Demand in Honda’s home market suffered after Japan raised its sales tax in April, slamming the brakes on consumer spending.
