Honda slashes profit forecast for 2008
Japanese automaker Honda slashed its profit forecast for the fiscal year today and announced that managers will take a 10% pay cut amid a global downturn in the auto industry.
President Takeo Fukui blamed the revisions on declining demand set off by the US financial crisis and the nose-diving dollar, which has recently fallen to 13-year lows against the yen.
Japan’s second-biggest automaker now expects 185bil yen (US$2.06bil) in group net profit for the fiscal year ending Mar 31, 2009. That’s less than a third of the 600bil yen it earned last fiscal year.
Tokyo-based Honda has already twice revised its forecast, the latest in Oct when it said it expected 485 billion yen in profit.
“Every day, the hardships we face are getting worse and worse. And there are no signs of recovery,” Fukui said at a news conference that was hastily moved up two days from the initial schedule.
Fukui said the automaker will focus on green technology, especially hybrids and small cars, to ride out the difficult times and prepare for recovery in the long run.
In recent years, the annual media event has usually been an occasion for Honda to announce ambitious plans for growth in key global regions and outline its strategy in green technology such as hybrids and fuel cell vehicles.
But speculation had been rife this year’s news will be dismal as the industry gets hammered by the global recession set off by the US financial crisis.
Particularly damaging to Japanese automakers has been the plunging dollar, which erodes their overseas earnings. For every yen the dollar declines, Honda loses about 18bil yen (US$200mil) in operating profit.
And the recent drop in auto sales isn’t helping either. In Nov, when US auto sales plunged 37% to their worst level in more than 26 years, Honda’s vehicle sales sank 32% from the same month a year ago.