Honda falls on profit fears, Nissan cuts output
Shares in Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz) slid 8 percent as Japan’s No.2 automaker looked set to issue its third profit warning in five months on Wednesday, due to huge currency losses and tanking global car sales.
Automakers everywhere are reeling from a sharp downturn in demand due to a global recession and tight credit, and are under pressure to put off big investments and expansion plans to weather the storm.
In the United States, General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) and Chrysler LLC CBS.UL are awaiting word from the U.S. government on billions of dollars in emergency loans they say they need to avert near-term collapse.
Honda’s local rival Nissan Motor Co Ltd (7201.T: Quote, Profile, Research, Stock Buzz) announced further planned cuts to production and contracted short-term workers in Japan.
A source with knowledge of the situation said Honda was preparing to lower its profit forecasts after having abruptly moved up its year-end news conference scheduled for Friday to Wednesday at 3 p.m. (1 a.m. EST).
Tokyo Stock Exchange rules stipulate that listed companies must swiftly announce any changes to guidance if their new profit figure is different by more than 30 percent, or revenue by more than 10 percent.
The Nikkei business daily said Honda would cut its operating profit forecast for the year to March to about 300 billion yen ($3.33 billion), down around 70 percent from last year or 45 percent from its most recent forecast sam day payday loan.
In late October, Honda lowered its forecast to 550 billion yen, setting its assumption for the dollar to average 100 yen in the second half — far more favorable than the current rate of 89 yen.
Every 1-yen swing in the dollar affects Honda’s annual operating profit by about 20 billion yen ($220 million), cutting the amount of overseas earnings when translated back into yen.
PRODUCTION CUTS
Analysts have said Honda’s latest profit projections would be difficult to reach in light of the big production cuts it has announced to bring down bloated inventory. Honda has so far scaled back output plans by about 200,000 units for this business year.
A poll of 18 brokers surveyed by Reuters Estimates forecasts Honda’s 2008/09 operating profit at 486 billion yen, although most estimates have not been updated in the last month.
Other automakers have also been slashing production.
Nissan, Japan’s No.3 automaker, said it would cut a further 78,000 units from local production, taking the tally for production cuts this business year to 225,000, or about 6 percent of its original 3.856 million unit forecast.
Nissan said the cuts at its three assembly plants and two engine factories in Japan would reduce its contracted short-term workers to zero by end-March, from 2,000 at end-October.
Filed under: news by John