Honda Bleak on China Forecast

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Things are looking bad for Japanese automakers in China. Honda has taken the lead over its rivals Nissan and Toyota by announcing today that its has cut its full-year net profit after sales forecast by 20%. Nissan and Toyota are expected to make similar announcements in the coming weeks.

[Fumihiko Ike, Honda Senior Managing Officer]: (Japanese, Male)
"We changed our estimates mainly due to the impact from the situation in China, the decrease of unit sales following the changes of business environment in European, South American and Indian markets, and the impact from the currency exchange rates in the developing countries."

Violent protests in China over disputed territorial claims for the Senkaku, or Diaoyu islands, already indicated that business for Japanese automakers will be taking a hit. But now that Honda has officially slashed its forecast of sales in China for this year by 130,000 unit, the severity of the impact is becoming clear.

In today's announcement Honda said it would continue to run two of its biggest plants in China on one shift, rather than two, until at least the middle of next month. Production will gradually increase during the lead up to the Chinese New Year in February.

Honda is hoping this would only be a temporary setback. The company is investing $880 million to expand its plants in Guangzhou and Wuhan over the next several years.

[Tetsuo Iwamura, Honda Executive Vice President]:
"As you know, China has become the biggest auto market in the world and it has undoubted growth potentials, so we stick to our investment plans bidding on the potentials."

Which may be a good thing for Honda's shareholders, who have seen shares dropping to almost a 9-month low.

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