U.S. is bright spot in Honda forecast
 | Iwamura: High N.A. marketing costs cut profit. |
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TOKYO -- Honda Motor Co. is banking on a big surge in U.S. sales to offset a darkening outlook for China and Europe that has forced the company to cut its full-year sales and profit forecast.
Auto sales are expected to climb 32 percent to 1.7 million units in North America in the fiscal year ending March 31, 2013, from 1.3 million a year earlier.
The target, in line with Honda's previous forecast, makes North America the earnings anchor amid slumping business elsewhere.
While releasing earnings for the quarter ended Sept. 30, Honda lowered its global fiscal year sales forecast because of softening business in China and Europe. Global sales are now predicted to be 4.1 million, down from the previous goal of 4.3 million.
Operating profit is now expected to rise to ¥520 billion, or $6.68 billion, from $2.97 billion the prior year. That's well below the forecast that Honda issued in April, which predicted operating profit would reach $7.96 billion.
Net income is forecast to be $4.81 billon, up from $2.71 billion a year earlier. The new goal is 20 percent below Honda's earlier target of $6.03 billion.
Honda's sales are getting whacked in Europe by that region's financial crisis and in China by an anti-Japan backlash triggered by a territorial despite between Tokyo and Beijing.
North America remains on a stable upward trajectory. Honda sales soared 50 percent to 404,000 units there in the quarter ended Sept. 30, from 269,000 a year earlier.
Despite the gains, regional operating profit slid in what is traditionally Honda's most profitable market. North American operating profit fell 44 percent to $342.7 million in the quarter, from $612.3 million a year earlier.
Executive Vice President Tetsuo Iwamura, who also is CEO of American Honda Motor Co., blamed the deterioration on increased expenses for incentives and marketing, especially in comparison to a very low base the previous year. Some of those marketing expenses were tied to the launch of the redesigned Accord.
This year Honda also weathered costly recalls. In July it recalled more than 321,000 CR-V crossovers and Acura models to fix faulty door locks.
In 2011, Honda's supply was crimped by that spring's earthquake in Japan, and the company spent a bare minimum on incentives and advertising to move cars.
The situation flip-flopped in 2012, when Honda was preparing for the Accord launch. It ramped up incentives to clear out inventories and spent heavily to market the redesigned version.
"The year before, we didn't use any promotions at all," CFO Fumihiko Ike said. "Plus, in America we had some recalls. So when you add in those quality costs, the overall net result was a reduction in profit."
In the latest quarter, global net income jumped 36 percent to $1.06 billion and operating profit surged 92 percent to $1.29 billion, as revenues rose 20 percent to $29.16 billion.
| Honda tempers outlook | |||
| Honda slashed its forecast for the fiscal year ending March 31, 2013, citing a weak European market and anti-Japanese demonstrations in China that have hurt sales there. | |||
| 2013 FY new forecast | 2013 FY prior forecast | 2012 FY actual | |
| Revenue | $125.8 billion | $132.2 billion | $102.1 billion |
| Operating profit | $6.68 billion | $7.96 billion | $2.97 billion |
| Net income | $4.81 billion | $6.03 billion | $2.71 billion |
| Global unit sales | 4.1 million | 4.3 million | 3.1 million |
| Results translated at an exchange rate of $1 = ¥77.90, the rate on Sept. 30. | |||
| Source: Honda | |||
You can reach Hans Greimel at hgreimel@crain.com. -- Follow Hans on 
