• Bloomberg


Honda Motor Co. on Tuesday forecast its first profit decline in three years as deliveries to China and Japan weakened.

Net income will drop 1.6 percent in the year ending in March from the previous year to ¥565 billion, the company said in a statement.

The new forecast is 5.8 percent lower than the ¥600 billion the automaker forecast in April and the average of ¥640.7 billion predicted by several industry analysts.

Honda is trailing its own target of selling 900,000 cars in China this year as demand shrank for key models such as the Accord sedan and CR-V sport utility vehicle.

In Japan, repeated recalls of the automaker’s best-selling model — the Fit — and an April increase in the consumption tax is seeing Honda fall back in its aim to boost sales by 21 percent this business year.

“The sales volumes are behind what they planned in regions including Japan, China and Thailand,” said Kota Yuzawa, a Tokyo-based analyst at Goldman Sachs Group Inc. “If it were not for the weaker yen, it would have been a tough quarter.”

The cut in forecast comes as Honda and other automakers are rushing to recall millions of cars to fix Takata Corp. air bags that can inflate with too much force and fling metal at passengers.

Honda said Monday it will book ¥5.7 billion in additional recall charges for vehicles, including its top-selling Fit compact and new Vezel sport utility vehicle.

The recall, announced last week for about 426,000 vehicles in Japan, involves flaws in ignition coils and electrical circuits, which were not covered by previous provisions, spokeswoman Akemi Ando said.

The recall — the fifth for the Fit and the third for the Vezel in the space of a year — comes as Honda targets a boost in domestic deliveries by 21 percent this year.

The issue led to President Takanobu Ito and other executives to cut their pay.

Previous recalls, due to defects in components such as the engine control unit, have cost Honda more than ¥10 billion over the past year.

Honda’s shares have fallen 23 percent this year, compared with a 3.7 percent decline in the benchmark Topix index.

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