Honda Motor Co., the nation’s second-largest carmaker, may raise about ¥100 billion by selling asset-backed securities or commercial paper to fund car loans as it expects demand to recover later this year.
The credit environment “has changed dramatically,” said Executive Vice President Koichi Kondo in an interview Thursday, adding that the funds would also be used to repay debt. Interest rates “may be the cheapest we’ve ever borrowed at.”
Honda expects global vehicle sales to rise to 1.65 million units in the second half of the year ending in March, compared with 1.55 million units in the first half. More people buying cars will require more money available for loans, Kondo said.
“If you don’t need to borrow, that means things are looking bad,” he said.
In the first five months of the year, Tokyo-based Honda’s sales in the United States, its biggest market, plunged 34 percent as higher unemployment deterred buyers. In Japan, sales have dropped 16 percent. The company’s new Insight hybrid helped it withstand a 29 percent industrywide sales decline in its home market during the period.
Honda’s fundraising plan would follow the company’s sale of ¥70 billion in three-year bonds on June 4, its first bond issue in 16 years. Rival Toyota Motor Corp. also plans to increase a planned bond sale by 63 percent to about ¥130 billion, according to two bankers. Sony Corp. earlier this week raised ¥220 billion in its biggest-ever bond sale.
“Automakers want to make sure that they secure funds when they can by as much as they can,” said Yoshihiro Okumura, who helps oversee the equivalent of $365 million at Tokyo-based Chiba-gin Asset Management Co. “The borrowing environment is now much easier.”
Honda not acquiring
The Associated Press
Honda Motor Co. has never had much interest in the assets of General Motors Corp. or Chrysler LLC, but it remains open to sharing hybrid and other technology with rival automakers, a senior executive said.
Executive Vice President Koichi Kondo said Honda was approached by Chrysler as a possible partner but the nation’s No. 2 automaker didn’t have to think long in rejecting the offer because it didn’t see any benefits.
“There was no merit for Honda,” he said in an interview this week at Honda’s Tokyo headquarters.
Honda also has little interest in any of GM’s assets for the same reason, he said. But Kondo didn’t rule out partnerships with rivals, including GM, in sharing ecological and safety technology if the deals offer clear advantages for Honda.
Kondo said Honda will focus on ecological vehicles and aim for cost cuts, partly through global models that can lower production costs because of sales numbers. He denied Honda was trying to get bigger.
“Size is merely what comes as a result” of other business efforts, such as creating products that answer consumer needs, he said.
Chrysler and GM, two of the U.S. Big Three automakers, have filed for bankruptcy protection.
Italy’s Fiat Group SpA became the new owner of most of Chrysler’s assets earlier this week, closing a deal that saves the troubled U.S. automaker from liquidation.
Detroit-based GM filed for bankruptcy protection June 1 and has said it plans to focus on four core brands: Chevrolet, Cadillac, Buick and GMC.
Last week, GM said it found a buyer for Hummer in China’s Sichuan Tengzhong Heavy Industrial Machinery Co., and Penske Automotive Group Inc. would buy the Saturn brand.
Honda, which makes the Insight hybrid and Accord sedan, has fared relatively better than not only GM and Chrysler but also its domestic rivals Toyota Motor Corp. and Nissan Motor Co.
Honda has been more cautious in expanding its model lineup and has a good global reputation for producing small cars with flair as well as good mileage.
But Kondo also said Honda was readying bigger models, which offer better profit margins for manufacturers, just in case Americans start buying them again.