Japan’s Honda sees declining profits on the semiconductor crisis

TOKYO (AP) – Honda’s first-quarter financial profit fell 33% from a year ago as a global shortage of computer chips, a pandemic-related shutdown in China and the rising cost of raw materials hurt the Japanese automaker.

Tokyo-based Honda Motor Co. reported Wednesday that profits were 149.2 billion yen ($1.1 billion) in the April-June quarter, down from 222.5 billion yen ($1.7 billion) a year earlier. Quarterly revenue fell 7% to 3.8 trillion yen ($28 billion).

Honda kept its profit forecast for the full fiscal year through March 2023 unchanged at 710 billion yen ($5.3 billion).

The semiconductor shortage has hurt all the world’s automakers, including Honda, despite strong demand, and manufacturers have been scrambling to secure alternative suppliers.

Honda, which makes the Accord sedan, Odyssey minivan and Civic compact, sold around 815,000 cars last quarter, down from 998,000 cars in the same period a year earlier. Car sales fell in almost every region around the world, including Japan, the United States and Europe.

“I ask for the understanding of all those who are still waiting for their vehicles and promise that our entire company is making every effort to make the deliveries even one day earlier,” said CFO Kohei Takeuchi.

Takeuchi said the semiconductor shortage reduced motorcycle production as well as car production, adding to uncertainty about the future outlook.

Honda said the recent shutdown in Shanghai was among the reasons for the chip shortage, but declined to give details.

Although sales in the U.S. are potentially facing a dent from worries about the recession and other economic difficulties, Takeuchi acknowledged that he was more concerned about the shortage problem and the production of the cars customers were waiting for.

Takeuchi noted that motorcycle sales for the quarter, which grew to 4.25 million motorcycles from 3.88 million a year earlier, were strong, particularly in India. The cheaper yen and cost cuts helped maintain profitability overall, he added.

The yen has been at a two-decade low against the US dollar. A cheap yen has historically served as a boon for exporters such as Honda by increasing the value of their overseas earnings when converted to yen. But it also increases the cost of imported components and materials.

Japan’s leading car manufacturer Toyota Motor Corp. recently reported that its first-quarter earnings fell nearly 18%. Nissan Motor Co. saw its quarterly result plummet to less than half of what it was the year before. Both were affected by the chip shortage.

Like the rest of the industry, Honda has aggressive ambitions in electric vehicles. Earlier this year, it announced an investment of 5 trillion yen ($37 billion) over the next decade in such research. This includes a partnership with General Motors Co. in North America to develop models that will go on sale in 2024.

To strengthen its capital base and retain a flexible capital strategy, Honda said it was buying back up to 100 billion yen ($740 million) of its own shares, from Friday through March 2023.

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Yuri Kageyama is on Twitter at https://twitter.com/yurikageyama

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