Honda Profits Drop 90% in Q3
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Honda looks now for an operating profit by the end of the fiscal year in March of $1.6 billion, down from last year's profit of $10.6 billion . Reasons for this drop include ever decreasing vehicle sales and bad currency exchange rates.
Low Q3 profits were also affected by the company' general expenses, increased costs of raw materials and ever bigger fixed costs per unit as a result of low production. The mildly good news that came from rise in sales in Asia and Brazil was dwarfed by the North American 5.1 percent drop in sales.
"We don't expect conditions in the US to improve in the first half of next year, and we can only hope they will start to recover in the second half," vice president Koichi Kondo was quoted as saying by Reuters. The Japanese automaker announced earlier this month its plans to cut 50,000 units from the American production output, in addition to the 370,000 units worldwide. As a result of production cuts, 3,100 people were laid off in Japan alone.
Even so, Honda could do better than rivals Toyota and Nissan as both manufacturers are expected to post losses."Honda is relatively better positioned than Toyota because it has focused on smaller cars and hasn't aggressively expanded its global operations like Toyota. It also helped that the Chinese market fared relatively well," added Koichi Ogawa, chief portfolio manager at Daiwa SB Investments, according to the news agency.
It is still hoped that the company will be among the few Japanese automakers that will escape an annual loss. This could be good news, as in its 60 years long history, Honda has never posted a loss. All look ahead to next week, when Toyota, Mazda and Suzuki announce their financial performance. Nissan will be the last of Japanese producers to do this, its report being due on February 9.
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