Honda plunges into red amid pandemic pain

TOKYO -- Honda Motor Co. tumbled to a $1 billion operating loss in the latest quarter amid slumping sales as the COVID-19 pandemic broadsided its key U.S. market.

The Japanese automaker swung to an operating loss of 113.6 billion yen ($1.06 billion) in the fiscal first quarter ended June 30, reversing an operating profit of 252.4 billion yen ($2.35 billion) the year before.

Honda also booked an 80.8 billion yen ($752.4 million) net loss in the three-month period. It had a net income of 172.3 billion yen ($1.60 billion) the year before.

In announcing the results in its Aug. 5 earnings report, the Japanese automaker said revenue plunged 47 percent to 2.12 trillion yen ($19.74 billion) in the April-June quarter, as worldwide sales slumped 40 percent to 792,000 vehicles in the period, led by declines in North America.

Citing the continued impact of the pandemic, Executive Vice President Seiji Kuraishi said operating profit was forecast to fall 68 percent to 200 billion yen ($1.86 billion) in the current fiscal year ending March 31, 2021. Net income is seen taking a 64 percent dive.

Global volume is forecast to decline 6.1 percent to 4.5 million vehicles for the fiscal year.

Honda’s dismal results come as the global auto industry reels from the impact of the pandemic and the resulting falloff in demand and regulations ordering factory closures.

Japanese rivals Nissan Motor Co., Mitsubishi Motors Corp. and Mazda Motor Corp., which have already reported earnings, warned of losses in the current fiscal year ending March 31, 2021.

Honda, which manufactures motorcycles in addition to automobiles, suspended production in 12 of 17 countries where it has operations because of the pandemic, Kuraishi said. Those plants are back online, but demand is recovering slowly.

"The situation won't get that much worse, but it will still take some time to recover to what we've seen in the past," Kuraishi said.

Honda said the pandemic took a 440.0 billion yen ($4.09 billion) bite out of the bottom line. Without that hit or the impact of a sizeable foreign exchange rate loss, Honda would have booked a profit increase in the fiscal first quarter, compared with a year earlier.

Honda expects the pandemic to dent earnings by a total of 665.0 billion yen ($6.19 billion) for the full fiscal year. Cash is getting tighter, but Honda said it sees no liquidity crunch.

North America, Honda’s second-biggest market after Asia, booked a regional operating loss of 77.8 billion yen ($724.5 million) in the period.

North American sales plunged 68 percent to 159,000 vehicles in the quarter. Honda expects North American sales to finish the fiscal year 16 percent lower, dropping to 1.54 million vehicles.

European sales fell 53 percent to 16,000 units in the quarter, even as regional operating profit improved to 4.8 billion yen ($44.7 million), from 2.6 billion yen ($24.2 million) a year earlier. European sales are seen falling 21 percent to 105,000 units for the full fiscal year.