Honda forecasts big profit drop, 6% sales decline this year

USA Today - Honda in Tokyo today forecast that it would take a 63.5% profit hit this year in the wake of continuing shortages after Japan's disaster.

According to the Associated Press, Honda's annual forecast for the fiscal year that began April 1 was more than a month late as it tried to get a clear picture of prospects for recovery. But Honda now says vehicle production in Japan is expected to be near normal this month. It earlier said that North American production, except for the Civic, will be at normal levels by August or September.

Honda made up as much lost production as it can, but said global vehicle sales for the fiscal year ending March 31, 2012, will drop 6% to 3.3 million vehicles.

Koji Endo, auto analyst at Advanced Research Japan in Tokyo, told AP that the disaster had hit Honda harder than Toyota and Nissan, partly because it was such a lean company it didn't have much inventory when the disaster struck.

"Honda was deeply hurt, and its strength of having little inventory is going to make its recovery take longer," he said, noting that Honda's auto business was likely in the red for the fiscal year and the results were being made up by its motorcycle division. "This is going to take awhile."

More details about Honda's annual forecast:

Honda acknowledged that a shortage of parts for certain models, such as Civic, will continue for some time.

Honda is projecting a profit of 195 billion yen ($2.4 billion) for the current fiscal year, down sharply from 534 billion yen recorded the previous fiscal year.

It also said higher raw material costs and research expenses related to future products, especially environmental technology, will hurt its bottom line.

Honda is now expecting sales revenue to slip 7.1% to 8.3 trillion yen ($104 billion) for the current fiscal year, it said in a statement.

Honda also cited an unfavorable exchange rate for the yen as chiseling away at its profitability. Honda said the dollar had dropped to about 80 yen recently from 86 yen the previous year, while the euro went to 110 yen from 114 yen.

Last week, Toyota said its annual profit for the fiscal year through next March will dive 31%. Toyota forecast a 280 billion yen ($3.5 billion) profit for the fiscal year, down from 408 billion yen for the previous fiscal year.

Nissan, which is allied with Renault, has not yet given its earnings outlook but is promising it before its June 29 shareholders' meeting.

Another problem the Japanese automakers are facing is an electricity shortage because of the destroyed nuclear power plant. Another plant is being shut down because of growing fears about the safety of nuclear power.

Japanese automakers are being asked to reduce electricity use by 15% in July through September. They are having workers produce vehicles on weekends instead of Thursdays and Fridays to avoid blackouts during peak demand periods.