Fri | Oct 19, 2018

Honda loses US$860m in early 2016

Published:Sunday | May 15, 2016 | 12:00 AM
The Takata building in Auburn Hills, Michigan, USA.
A close-up of the Honda logo.

Honda Motor Co is reporting a •93.4 billion (US$860 million) loss for January-March as the Japanese automaker is hit by costs for a massive airbag recall and an unfavourable shift in exchange rates.

Tokyo-based Honda reported an 81.9 billion yen profit in the same quarter of 2015.

Honda is the biggest customer of Japanese airbag maker Takata Corp, which is recalling millions of defective airbags whose inflators can explode with too much force, spewing shrapnel inside the vehicle.

Honda said on Friday quarterly sales rose five per cent to •3.66 trillion ($34 billion) as vehicle sales grew.

For the fiscal year ended March 2016 Honda's profit plunged 32 per cent to •344.5 billion (US$3.2 billion) as quality-related expenses and the strong yen offset gains from cost cuts and strong performance in the North American market.

The weak yen works as a plus for Japanese exporters like Honda, but the currency has been strengthening lately. For the fiscal year through March the dollar cost •115, down from •119 the previous fiscal year, according to Honda's average rate.

Honda, which makes the Odyssey minivan, Accord sedan and Asimo robot, forecast a 45 per cent recovery in annual profit to •390 billion yen (US$3.6 billion).

For the fiscal year ended March 2016 Honda sold 4.7 million vehicles, better than the 4.3 million vehicles it had sold the previous fiscal year. It sold 17.1 million motorcycles, slightly lower than the 17.6 million sold the previous fiscal year.

It expects to sell 4.9 million vehicles and 18.4 million motorcycles for the fiscal year through March 2017.

Honda said other quality-related expenses hurt earnings, but the biggest damage came from Takata-related recalls.

So far, Honda has recalled 51 million Takata air bag inflators. Some vehicles are being recalled many times because cars have many airbags. The number doesn't account for the additional recalls announced last week.

The inflators are responsible for at least 11 deaths worldwide and more than 100 injuries. Authorities in Malaysia are investigating two more recent deaths in cars with Takata airbags that ruptured.