Honda Motor Co. (HMC) revealed that it may suspend up to half of its workforce at its manufacturing facility in the Mexico’s Jalisco state. The plant experiences low auto parts inventories due to the earthquake and tsunami in Japan that killed about 10,000 people and damaged roads, ports and bridges.
The plant produces CR-V sports utility vehicle. The decision could affect about 1,100 employees at the facility.
The country imports about $2.5 billion worth of auto parts from Japan each year. It represents about 8% of the company’s total imports.
Other Japanese automakers, including Toyota Motor Corp. (TM) and Nissan Motor Co. (NSANY), are also plagued by the natural disaster in the country. Toyota has extended its production shutdowns in Japan till March 22 while Nissan has decided to suspend production until March 20.
Honda, a Zacks #3 Rank (Hold) stock, posted a 40% decline in profit, reaching ¥81.12 billion ($995 million) or ¥45.01 (55 cents) per share in the third quarter of its fiscal 2011 from ¥134.63 billion or ¥74.19 per share in the same quarter of prior fiscal year. The fall in profit was attributable to decrease in automobile unit sales in all the regions, except North America.
Consolidated net sales and other operating revenues in the quarter slipped 6% to ¥2.11 trillion ($25.90 billion) on the back of unfavorable currency translation and lower automobile sales in Japan, despite increased revenues from the motorcycle business in the Asian countries. At constant exchange rates, Honda’s revenues decreased 0.8%.
Consolidated operating profit ebbed 29% to ¥125.65 billion ($1.54 billion) from ¥176.97 billion. This was attributable to increased selling, general and administrative (SG&A) and research and development expenditures as well as unfavorable foreign currency exchange movements that more than offset the positive impact from better model mix and ongoing cost reduction measures.
The company has lowered its revenues guidance for the full fiscal 2011 based on lower outlook for unit sales in all the segments. However, the company has upgraded the outlook for operating profit, profit and earnings per share.
For the full fiscal year 2011 ending March 31, 2011, Honda projected a 3.7% increase in revenues to ¥8.9 trillion compared with the earlier projection of a 4.9% increase in net sales and other operating revenues to ¥9 trillion ($108.59 billion).
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