TOKYO (Dec. 17, 2008) — Honda President Takeo Fukui shifted into crisis mode today, slashing sales and profit forecasts, delaying plant openings, cutting executive pay and axing the NSX sports car program to rein in costs.
Fukui now expects operating profit to tumble 81.1 percent to $2 billion in the fiscal year ending March 31. The revision came less than two months after an earlier downgrade in which Honda Motor Co. said operating profit would fall 67.3 percent.
The U.S. meltdown is largely to blame. Honda now sees North American sales dropping 14.1 percent to 1.59 million units in the fiscal year. It had predicted an 8.4 percent drop.
"We had no choice but to take various actions in a very short time," Fukui said at a year-end press conference that was hastily bumped up two days ahead of schedule. "The situation is worsening by the day, and there is no immediate prospect for recovery."
Cut jobs in Japan
Like its Japanese rivals, Honda has cut jobs at home and scaled back global production. In addition, the yen has climbed 18 percent against the dollar since August, which shrinks revenues and earnings from the United States.
Last week Honda pulled out of Formula One racing to save money. But Fukui said more drastic action was needed. Among his new orders:
* Delay openings of two assembly plants in Japan for at least one year.
* Postpone capacity expansions at factories in India and Turkey.
* Scrap plans to launch the Acura brand in Japan in 2010.
* Put off the opening of the new Sakura R&D center in Japan.
* Cancel development of the V-10 NSX sports car.
* Cut high-level executive monthly salaries by 10 percent.
* Delay introduction of large clean-diesel models in the United States and Japan.
For good measure, Honda will cut an additional 450 contract workers by February, bringing total Japanese job cuts to 1,210 this fiscal year. Fukui also trimmed domestic production by another 54,000 units, making this year's global cut 314,000 vehicles.
"All investment will be re-examined from scratch," Fukui said. "The situation is very urgent, and even a slight delay in management decisions could be critical."
Fukui said Honda would redouble its focus on small, fuel-efficient cars. As part of the push, it make the North American version of the Fit compact at the company's Saitama factory, starting in the spring. That will be in addition to Fit production at its Suzuka plant.
Honda also will be developing an entry-level car smaller than the Fit for sale in emerging economies. It should be ready within three years, Fukui said.
Fukui said he supports a government bailout for the Detroit 3, particularly since a bankruptcy could torpedo Honda's North America supply chain as well. As a precaution, Honda is identifying at-risk suppliers and drafting contingency plans should they also go down.
Fukui said Honda could ship parts from Japan, find alternative components locally or start stockpiling components to keep Honda in operation for one month.