Honda Motor Co. (HMC) has alerted its U.S. dealers about supply shortages of its popular models, Civic compact and CR-V small SUV, due to lower availability of parts that will support the required production level to meet their demand. The parts shortage came on the back of earthquake and tsunami in Japan on March 11 that damaged many parts-supplying companies’ plants and paralyzed the power supply system.
Both the models are manufactured in North America. Currently, the company is running low on parts such as chips, sensors and other parts, which are imported from Japan.
As a result, the automaker has decided to cut production of the new 2012 Civic – the sixth most popular car in the U.S. – through the summer. It has also delayed the launch of 2012 CR-V by at least a month this fall. However, Honda will keep making the 2011 version, which ranks No. 11 in U.S., to make up for shortages
Apart from these two models, Honda stated that it will cut supply of Acura luxury cars as well as TSX wagon and the RL sedan until later in the year. It also revealed that it will be able to import only a limited number of Japan-built cars in the U.S, which include Fit subcompact, CR-Z, Insight and Civic gas-electric hybrids until later in the year. About 20% of the Honda vehicles sold in North America are imported from Japan.
Honda’s worldwide production went down 19.2% to 282,254 vehicles while its domestic production plunged 63% to 34,754 vehicles in March. Recently, the company revealed that domestic production volume will remain at approximately 50% of the original production plan until the end of June. However, it will be normalized before the end of 2011.
Nearly every major automakers, including Toyota Motor Co. (TM) and Nissan Motor Co. (NSANY) in Japan and General Motors Co. (GM) and Ford Motor Co. (F) in the U.S. are plagued by the natural disaster in the country. They have either suspended or cut down their production in the wake of plant outages and parts supply shortage.
The shortages will mostly affect supply of fuel-efficient lineups that are highly demanded at the time when gasoline prices hit $4 per gallon in the U.S. As a result, car buyers may need to shift to alternative brands or postpone their purchases for some time.
Honda posted a 38% fall in profit to ¥44.55 billion ($536 million) or ¥24.72 per share (30 cents per share) in the fourth quarter of the fiscal year ended March 31, 2011 from ¥72.18 billion or ¥39.78 per share in the same quarter of prior fiscal year.
The decline in profit was attributable to unfavorable currency translation effects, higher selling, general and administrative (SG&A) expenses and the tsunami and earthquake in Japan. These more than offset the positive impact from cost reduction measures, lower R&D expenses, increase in sales volume (except in the Automobile segment) and model mix, and operating income related to licensing agreements.
Consolidated net sales and other operating revenues slid 3% to ¥2.21 trillion ($26.62 billion) on the back of same factors outlined above, despite increased revenues in the motorcycle business and revenues related to licensing agreements. However, at constant exchange rates, revenues increased 3.3%. Consolidated operating profit plummeted 52% to ¥46.21 billion ($556 million) from ¥96.10 billion due to the same factors affecting the net income.
The company could not furnish any guidance for the fiscal six months ending September 30, 2011 or for the fiscal year ending March 31, 2012 due to the uncertainty arising from the earthquake. It currently retains a Zacks #3 Rank on its stock, which translates to a short-term (1 to 3 months) rating of “Hold”.
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