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Airbag Recall Dents Honda's Bottom Line

Jan. 30, 2015
Honda's airbag recalls -- and others involving its Fit compact car and Vezel SUV -- diluted the positive impact of the yen's sharp decline, which has inflated profits among major Japanese exporters.

TOKYO - Honda cut its full-year profit forecast on Friday as the Japanese automaker grapples with soaring recall costs, including from an exploding airbag crisis linked to at least five deaths.

The downgrade came after Honda said it was probing a fatal crash in the United States that may have been caused by a defect in airbags made by embattled supplier Takata, which has sparked the recall of millions of vehicles worldwide by 10 major automakers.

Honda, Japan's third-biggest automaker, said Friday it was cutting its fiscal year to March net profit forecast by 3.5% to 545 billion yen ($4.6 billion), citing "quality-related expenses" as well as falling demand in Japan and the world's biggest vehicle market, China.

It blamed the move on a "decline in unit sales in Japan and China due to the difficult automobile market environment and a forecast increase in quality-related expenses, mainly in North America".

One U.S. woman's death was initially investigated as a murder due to her grisly injuries until police switched their focus to the vehicle airbag.

The U.S. auto safety regulator has demanded a recall of all cars in the U.S. with the suspect Takata airbags on the driver's side.

Despite the warnings over recall costs and weakness in the key Chinese market, the yen's decline did boost Honda's net profit by 5.3% to 424.9 billion yen for the nine months through December. Sales rose 6.3% to 9.3 trillion yen.

But demand in Honda's home market suffered after Japan raised its sales tax in April, slamming the brakes on consumer spending.

Honda is the first of Japan's "Big Three" automakers to post its earnings, with rival Toyota and Nissan both reporting over the coming weeks. 

Copyright Agence France-Presse, 2015

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