Honda lowers profit forecast after vehicle recall costs mount

[TOKYO] Honda Motor Co., Japan's third-largest carmaker, cut its profit forecast for the second time this year as recall costs mount.

Net income will probably be 545 billion yen (S$6.2 billion) in the fiscal year ending March, the Tokyo-based carmaker said in a statement today. That compares with the 565 billion yen the company previously forecast and the 591.2 billion yen average of 24 analysts' estimates compiled by Bloomberg. Honda in October cut an earlier forecast.

Honda earnings were eroded by recalls prompted by flawed air bags made by Takata Corp. and the new hybrid systems in the best-selling Fit compact car and the Vezel SUV. The carmaker's worst quality issue in decades has derailed its plans to introduce new models, led President Takanobu Ito to take a 20 per cent cut in his monthly pay for three months and triggered the projection of its first profit drop in three years.

"The worst may be over for the recalls but we don't know how much it will have to pay in the end for the costs" for air- bag related recalls, Koichi Sugimoto, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co., said before the announcement. "Their full year target is a challenge."

BLOOMBERG