Dow Jones Newswires (Tokyo) - Honda Motor Co.'s (7267.TO) chief financial officer said Tuesday that the turmoil in financial markets is stoking concerns of growing pressure on the company's already yen-battered business.
While it is too soon to predict exactly how the business environment might deteriorate, the plunge in the U.S. stock market could dent auto demand and it remains unclear whether the yen would turn weaker or strengthen further after another currency market intervention following the downgrade by Standard & Poor's Corp. of the U.S.'s credit rating, Fumihiko Ike said at a meeting with reporters.
Honda had just planned to bring its R&D spending that it had cut over the past few years back to a normal level seen before the financial crisis to bolster its technological development, but then it was saddled with damages from the March 11 earthquake. The car maker now faces the potential slump in the global economy, he said.
"Our scenario may be have been derailed by the world's economy turning sour. This is really hard," the CFO said.
Honda - Japan's third biggest car maker by volume - expects U.S. industry-wide auto sales of 12.4 million vehicles for this year, which the CFO said is relatively conservative compared with most projections of more than 13 million. But he now isn't sure whether the U.S. market will even make the bearish Honda forecast level.
The car maker is currently losing money by exporting vehicles from Japan at the current dollar's levels around Y77-Y78. Honda uses imported parts and increased overseas production to soften the impact of the yen's strength.
But if the dollar remains as weak as it is now for a year or so, the company may need to launch more countermeasures, the CFO said, though he declined to elaborate.
He hopes the greenback will at least return to Y80 on which the company bases its earnings forecast for the current fiscal year through March, he added.
