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Mounting recall costs and weak sales in Japan prompted Honda to issue its second profit warning in three months, putting it behind rivals bolstered by a weaker yen and strong US sales.
Japan’s third-largest auto group lowered its net profit forecast for the fiscal year to March to Y545bn ($4.6bn), from its earlier forecast of Y565bn. That is a 5.1 per cent decline from a year earlier.
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Honda said it expects to sell 4.45m vehicles worldwide, fewer than its earlier target of 4.62m, blaming weaker-than-expected sales in Japan, China and the US.
The carmaker, known for its Accord and Civic models, has suffered a string of safety issues over the past year. In October in Japan, it issued the fifth recall of its Fit hybrid model in a year due to software glitches, which have also led to delays in the launch of new models.
This month, Honda agreed to pay a record $70m fine in the US for failing to report incidents of death or injury and for warranty claims over more than a decade.
The company recently expanded its recall campaign to replace airbags made by Takata to about 13m vehicles globally. Honda said it would set aside another Y50bn for quality-related costs, which includes the expense of fixing Takata airbags.
Carmakers around the world have been carrying out recalls since 2008 to fix the airbags where inflators can deploy with too much force, spraying shrapnel into the faces of drivers. The defect has been linked to at least five deaths.
“So far, we are not seeing a decline in North American sales from the airbag issue,” Tetsuo Iwamura, Honda’s executive vice-president, said on Friday.
Analysts said it was too early to see any impact on sales from the airbag recall.
For the three months to December, Honda said its net profit dropped 15 per cent from a year earlier to Y136.5bn on revenue of Y3.3tn, which was up 9 per cent.
Carmakers in Japan generally have benefited from the weaker yen with Toyota and Mazda anticipating a record profit this year. The yen’s fall increases the value of earnings repatriated from sales abroad.
But Honda said the benefits were erased by a sales decline, particularly in Japan and China.
A more worrying factor, said analysts, was Honda’s lower sales outlook for the North American market where it expects to sell 1.8m vehicles, down 10,000 units from an earlier target.
In the US, where demand for fuel-hungry vehicles has been boosted by falling petrol prices, carmakers with the strongest line-ups of pick-up trucks and sports utility vehicles have benefited. Honda, which focuses on fuel-efficient cars, is weak in those categories.
Sales in December for General Motors, the US’s largest carmaker by sales, were up 19 per cent year-on-year. Sales for Chrysler, which makes the fashionable Jeep SUV and Ram pick-up brands, were 20 per cent ahead of December 2013.
“Honda doesn’t have markets where it can turn to when US sales are weak. All of its main markets including China and Japan are doing badly,” said Koji Endo, auto analyst at Advanced Research Japan.