Reply #16: Honda Rides Into Red Territory [View All]

[ozymandius]

The automaker is set to post its first half-year operating loss in 11 years. And there's little relief ahead.

The market expected the global recession to decimate Japanese automakers' profits, but few expected their second-half losses to be so huge. Now the question is whether whopping output and capital spending cuts will even allow them to break even next year.

Honda Motor looks on course to post an operating loss in the second half to the tune of at least 120.0 billion yen ($1.4 billion), on the severe demand slump and surge in the value of the yen. This would be the company's first half-year operating loss in over a decade. Japanese automakers are scrutinizing all their pipeline investments for possible delays or cancellation, slashing output and jobs, and looking to wrangle price cuts from steelmakers and other suppliers.

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Honda said it expected sales to have fallen 13.0% for the year, because of a collapse in demand from the U.S. and Europe. The yen's surge to decade-highs against the dollar and euro has dealt a further devastating blow to Japanese exporters by eroding their overseas earnings. Honda said it would cut its dividend to 11 yen (12 cents) per share for the October-December period, down from 22 yen (25 cents).

http://www.forbes.com/markets/equities/2008/12/17/honda-cuts-guidance-markets-equity-cx_twdd_1217markets3.html