Honda slashes profit forecast amid global downturn
TOKYO -- What's more, the dollar fell to a fresh 13-year low against the yen, further pinching the automakers' income from exports. That's because as the dollar falls, it translates to fewer yen when the Japanese companies bring the money home.
For every yen the dollar declines, Honda loses about 18 billion yen ($200 million) in operating profit. In trading Wednesday, the dollar fell as low as 88.15 yen.
"Every day, the hardships we face are getting worse and worse. And there are no signs of recovery," Honda President Takeo Fukui said at a news conference that was hastily moved up two days from the initial schedule.
To take responsibility for the faltering results, Honda directors will take a 10% pay cut and further bonus reductions are likely, he said.
Honda now expects 185 billion yen ($2.06 billion) in group net profit for the fiscal year ending March 31, 2009 — less than a third of the 600 billion yen it earned last fiscal year.
Honda has already twice cut its forecast for the current year. In October, it said it expected 485 billion yen ($5.4 billion) in profit.
Fukui said Honda's worldwide vehicle sales in 2008 are expected to reach 3.77 million units, almost unchanged from 2007. Sales are plunging in the U.S. and other regions, with even previously healthy emerging markets getting battered, according to Honda.
Underlining the tough times ahead, Fukui refused to set a vehicles sales target for 2009 — an unusual move for Honda.
Earlier this month, Honda said it was pulling out of glamorous but expensive Formula One racing to save money and focus on its core car business.
Mamoru Katou, auto analyst at Tokai Tokyo Research in Nagoya said Honda is taking the right action in guarding against a shrinking market.
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