Honda's Profit Rises as Air-Bag Cost Ebbs -- WSJ
February 04 2017 - 3:02AM
Dow Jones News
By Sean McLain
TOKYO -- Honda Motor Co. is putting years of expenses related to
recalled air bags in its rearview mirror. Now the company hopes
U.S. President Donald Trump won't push its revival off course.
On Friday, Japan's third-largest car maker by global sales
reported a 36% jump in net profit for the December quarter. Its
latest cars and sport-utility vehicles have been well received, and
the company predicts record sales of five million vehicles for the
financial year ending in March.
But Mr. Trump's threats of a tax on car imports could throw a
spanner in the works for auto makers globally.
The U.S. president has taken to social media to criticize car
makers for producing vehicles in Mexico. He also has criticized
Japan for setting up barriers to competition from American car
makers there.
"He has been expressing his views on Twitter, but quite often
his understanding is different from reality," said Seiji Kuraishi,
Honda's executive vice president.
Honda, like many Japanese companies, hopes a coming U.S. visit
by Japanese Prime Minister Shinzo Abe will clear the air. "We would
like [Mr. Trump] to know the real situation, and we hope that
Japan-U. S. relations will improve and the U.S. economy will grow
stronger," said Mr. Kuraishi. "But first, we hope to clear his
misunderstandings."
Honda sold 1.6 million cars and trucks in the U.S. last year. Of
those, 1.3 million vehicles were built in the U.S.
Honda and other Japanese car makers have looked to Mexico to
bolster U.S. sales growth. Honda imports 8% of the vehicles it
sells in the U.S. from Mexico, compared with less than 5% for
Toyota Motor Corp. which is building a $1 billion plant for Corolla
sedans there. Nissan Motor Co. gets around a quarter of its U.S.
sales from Mexican imports.
The White House is considering a 20% tax on imports from
countries with which it has a trade deficit. Mr. Trump said he
wanted to renegotiate the North American Free Trade Agreement that
allows Mexico-made cars to be freely exported to the U.S.
Any cut in exports could cut into sales of the Honda's popular
HR-V crossover. Increasing the vehicle's availability by building
it in Mexico is a crucial part of Honda's strategy to maintain
sales growth, the auto maker has said.
A slowdown in sales would come as the company is trying to
repair its balance sheet after having set aside Yen556 billion
($4.91 billion) for costs related to recalls of faulty air bags
made by Takata Corp.
Honda hopes to maintain production figures in Mexico, "but if a
high tariff is imposed, we have no choice but come up with some
response," said Mr. Kuraishi.
The company reported its second consecutive leap in net profit
for the December quarter. Without provisions for expected recall
expenses to weigh it down, profit rose 36% to Yen168.8 billion from
Yen124.1 billion a year ago.
Honda raised its full-year earnings projection to Yen545 billion
from Yen415 billion to account for a weaker-than-expected yen and
cost cuts.
The company has been cutting costs to build a leaner, more
profitable organization. Its operating profit, which has long
lagged behind that of its rivals, is improving -- even if weighed
down by the company's reliance on sedan sales in a U.S. market
where most car buyers want SUVs.
Write to Sean McLain at sean.mclain@wsj.com
(END) Dow Jones Newswires
February 04, 2017 02:47 ET (07:47 GMT)
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