Honda Motor Co. (HMC) plans to consolidate its product line-up in Japan by discontinuing some models in the country. The automaker has already stopped developing its minivan, Elysion, and will halt selling the mid-sized luxury sedan, Legend (sold as Acura in the U.S.) in the Japanese market.
The Nikkei business daily reported that Honda has also decided to sell only the hybrid version of its subcompact, Civic, powered by a 1.5-liter petrol engine with 150 hp, in Japan. However, the automaker will sell the other variants of Civic, powered by gasoline, petrol and diesel, in other parts of the world. In 2011, Honda will launch a new version of Civic, powered by petrol and diesel engines and the other using hybrid systems.
Honda’s plan to consolidate its line-up in Japan is in line with its strategy to focus mainly on the hybrid car business in the country. Recently, it announced plans to resume construction of its hybrid plant in Yorii, Saitama, of Japan while scrapping its plan to build a 660cc mini-vehicle factory at its subsidiary Yachiyo Industry Co. at the same time.
The automaker has initially planned to manufacture clean-diesel and other fuel-saving vehicles at the Yorii factory. However, with the tightening of environmental regulations around the world and a rebound in demand in Japan and North America, Honda has decided to roll out more hybrid cars.
In the fourth quarter of its fiscal year ended Mar 31, 2010, Honda posted a profit of ¥72.1 billion ($776 million), a stupendous 140% increase from the same period in 2009. This was equivalent to earnings per share of ¥39.78 (43 cents), an increase of ¥138.95 ($1.50) from a loss of ¥99.17 ($1.07) in the corresponding period last year.
Consolidated net sales and other operating revenues in the quarter rose 27.8% to ¥2.3 trillion ($24.5 billion). This was attributable to favorable currency translation effects and increased sales in the automobile business. At constant exchange rates, Honda’s revenues would have increased 25.4%.
Consolidated operating income increased ¥368.2 billion ($3.96 billion) to ¥96 billion ($1.03 billion). This was attributable to increased profits on the back of increased revenue, reduction in vehicle costs and a decline in selling, general and administrative (SG&A) expenditure.
However, Honda’s results are expected to be adversely affected by unfavorable currency exchange rates, flat-to-lower sales in its key markets and increased competition. Accordingly, we currently have a Zacks #5 Rank (Strong Sell) rating on the company’s shares in the short term.
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