Honda Motor Co. lowered its annual profit forecasts for a fourth time this year, while rival Toyota Motor Corp.'s losses are growing as sliding global car sales force the industry to cut production further.
The spreading global recession has dealt a severe blow to the auto industry as consumers, fearing for their jobs, have put off buying big-ticket items. Tightening credit has also made it difficult for potential buyers to get financing.
While a shrinking car market has forced automakers everywhere to scale down production, analysts said Honda faces an especially tough quarter because it waited longer than Toyota and Nissan Motor Co. to make the move. Honda, Japan's second-biggest automaker, this week announced further production cuts of 50,000 vehicles for the year to end-March, on top of the 370,000 that had been planned in North America, Europe and Japan. "The sales environment is changing faster than we were able to predict," Honda executive vice president Koichi Kondo told a news conference, noting that four profit warnings in a single year was probably unprecedented in Honda's history.
"We don't expect conditions in the US to improve in the first half of next year, and we can only hope they will start to recover in the second half," he added. Struggling to clear bloated inventory, Honda is scheduled to close its UK factory for four months starting in February.
Mr Kondo said it would likely take until June or July to bring global inventory down to appropriate levels.
Honda said it expected an operating profit for the year to end-March of 140 billion yen (€1.24 billion), down from a record 953 billion yen last year and below its previous profit forecast of 180 billion yen.
Half of that will likely come from its motorcycle business, Mr Kondo said, noting the segment's high level of local production and parts procurement helped to shield Honda more effectively against currency swings compared with other Japanese carmakers.
Honda expects annual net profit of 80 billion yen instead of 185 billion yen. Analysts have said automakers' final results for this year could change dramatically depending on how much and how early they set aside reserves against financing losses and other costs to start the new year on a cleaner slate.
Honda said it now sees losses from soured credit and falling residual values of used cars to total almost 100 billion yen this year, double what it had foreseen three months ago. October-December operating profit slumped to 102.45 billion yen from 276.24 billion yen, while quarterly net profit crashed to 20.24 billion yen from 200 billion yen a year earlier.
Third-quarter revenue fell 17 per cent to 2.53 trillion yen.
Still, Honda is among the few Japanese automakers expected to escape an annual loss.
Toyota, until last year the most profitable automaker in the world, last month projected its first operating loss in the year to March, of 150 billion yen, as capacity utilisation at its global factories falls below the break-even point.