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Honda 9-Month Operating Profit Tumbles After Takata Costs

Jan. 29, 2016
Net profits increased 2.4% through December to more than $3.6 billion, but operating profits dropped 3.0% “due to an increase in sales costs, including quality-related ones.”

TOKYO — Honda reported a fall in nine-month operating profit on Friday due to “quality-related” costs — seen as linked to an exploding airbag crisis at parts supplier Takata — but said net profit rose.

Net profit in the nine months through December rose 2.4% to 437.9 billion yen ($3.61 billion), as sales jumped 11.3% to 10.94 trillion yen ($90.11 billion), the company said in a statement. But operating profit fell 3.0% to 567.2 billion yen ($4.67 billion), “due to an increase in sales costs, including quality-related ones,” trimming its full-year sales forecast to 14.55 trillion yen from the previous 14.60 trillion yen ($119.85 billion from $120.26 billion).

Despite growth in sales, “the negative impact of U.S. dollar valuations against other currencies” also led to the weak operating profit.

For the full-year to March, Honda kept forecasts for net profit and operating profit at 525 billion yen ($4.32 billion), up 3.1% year-on-year, and 685 billion yen ($5.64 billion), up 2.1% compared to the previous year, respectively.

“Honda is recovering steadily,” Shigeru Matsumura, an analyst at SMBC Friend Research Center, told AFP ahead of the carmaker’s latest earnings report. “We assess that Honda is turning the corner from the negative impact of the airbag accidents and is now able to concentrate on its primary sales operation.” 

Sales in Japan, however, have been sluggish after a sales tax rise last year dented consumer spending and as younger urban residents delay buying vehicles.

In June, Honda revised down its annual earnings for the previous fiscal year, blaming the expanding recalls of faulty airbags made by embattled supplier Takata, which have been linked to 10 deaths and scores of injuries.

Of the dozen global automakers affected by the airbag crisis, Honda has been the hardest hit, with the company recalling more than 24 million vehicles to fix the defect.

Honda’s earnings announcement came as reports said Takata’s president, Shigehisa Takada, was set to resign Friday over the crisis, which the company later denied in a statement. The reports “are not what we have announced, and at this point he has no intention of resigning,” the statement said.

In the same statement, Takata said that it held a meeting Friday to explain its current situation to automakers, though refrained from disclosing details of the discussions. 

The costs of millions of recalls will likely surpass 500 billion yen, and Japanese automakers are planning to demand that Takata cover the cost once they determine the cause of the defect, the top-selling Yomiuri Shimbun said in a report Friday.

Copyright Agence France-Presse, 2016

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