Japan’s Honda Motor Co. sliced 6.5 per cent off its core annual profit forecast as it set aside hundreds of millions of dollars in extra cash to cover an extended car recall to replace potentially faulty airbags made by Takata Corp.

Reporting its third-quarter earnings which fell by nearly a quarter as it soaked up recall costs, Japan’s third-largest automaker said it now expects an operating profit of 720 billion yen (€5.3 billion) for the year to March 31.

It previously forecast 770 billion yen, but has set aside an extra 50 billion yen to cover what it said were quality-related costs including the Takata air bag recalls. Still, Honda’s executive vice president Tetsuo Iwamura said: “We are not seeing a big impact on sales in North America from the airbag issue.”

In the three months ended December, Honda said operating profit skidded 22.5 per cent to 177.2 billion yen from 228.57 billion yen in the same period a year earlier. That was below the 189.11 billion yen forecast by Thomson Reuters SmartEstimate from a poll of 10 analysts.

Honda also said it expects to sell a total of 4.45 million cars this fiscal year, down from the 4.62 million it previously forecast, as sales in Japan fall short of its original target. With new model launch delays and fierce competition in the domestic small car market, the company now expects to sell 790,000 cars in Japan, 11 per cent below the 890,000 it previously expected.