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Honda sees nine-month fall in operating profit on exploding airbag costs

AFP-JIJI

Honda Motor Co. on Friday reported a fall in operating profit over nine months due to “quality-related” costs seen as linked to the exploding airbag crisis at parts supplier Takata, but said net profit rose.

Net profit in the nine months through December rose 2.4 percent to ¥437.9 billion ($3.62 billion), as sales jumped 11.3 percent to ¥10.94 trillion, the company said in a statement.

But operating profit fell 3.0 percent to ¥567.2 billion, “due to an increase in sales costs, including quality-related ones,” Honda said, trimming its full-year sales forecast to ¥14.55 trillion from the previous ¥14.60 trillion.

Despite growth in sales, “the negative impact of U.S. dollar valuations against other currencies” also led to the weak operating profit, Honda said.

For the full-year to March, the maker of the Civic sedan kept forecasts for net profit and operating profit at ¥525 billion, up 3.1 percent year-on-year, and ¥685 billion, up 2.1 percent, respectively, compared to the previous year.

“Honda is recovering steadily,” Shigeru Matsumura, analyst at SMBC Friend Research Center, said ahead of the carmaker’s latest earnings report.

“We assess that Honda is turning the corner from the negative impact of the airbag accidents and is now able to concentrate on its primary sales operation.”

Sales in Japan, however, have been sluggish after a sales tax hike last year dented consumer spending and as younger urban residents delay buying vehicles.

In June, Honda revised down its annual earnings for the previous fiscal year, blaming the expanding recalls of faulty air bags made by embattled supplier Takata, which have been linked to 10 deaths and scores of injuries.

Of the dozen global automakers affected by the crisis, Honda has been the hardest hit, with the company recalling more than 24 million vehicles to fix the defect.

Honda’s earnings announcement came as reports said Takata’s president, Shigehisa Takada, was set to resign on Friday over the crisis, which the company later denied in a statement.

The reports “are not what we have announced, and at this point he has no intention of resigning,” the statement said.

In the same statement, Takata said that it held a meeting Friday to explain its current situation to automakers, though it refrained from disclosing details of the discussions.

The costs of millions of recalls will likely surpass ¥500 billion, and Japanese automakers are planning to demand that Takata cover the cost once they determine the cause of the defect, the top-selling Yomiuri Shimbun newspaper said in a report Friday.