Honda Earnings Hammered By Recalls

By Yoko Kubota 

TOKYO-- Honda Motor Co. cut its full-year net profit forecast by 3.5% after being hit by costs related to recalls over explosive air bags made by Takata Corp.

The Japanese auto maker Friday said it now expects to post a Yen545 billion net profit in the fiscal year ending in March, which would be down 5.1% from last fiscal year.

Honda's October to December net profit fell 15.1% from a year ago to Yen136.5 billion, slightly below a mean estimate of Yen137.3 billion by 26 analysts, according to financial data provider FactSet.

Its third quarter revenue rose 8.9% to Yen3.3 trillion.

The weakening yen is set to benefit all Japanese auto makers because it makes exports cheaper and helps them convert money made overseas at a more favorable rate. But for Honda, the first of the three top Japanese auto makers to report third-quarter financial results, that boost was offset by mounting costs related to recalls and safety.

Earlier this month, the U.S. auto safety regulator slapped Honda with $70 million in fines for failing to report potential safety problems in vehicles for more than a decade.

Honda is also taking the biggest hit among auto makers that have recalled vehicles over Takata-made air bags that could explode and shoot out shrapnel at vehicle occupants. Honda accounts for more than half of the around 25 million vehicles that have been recalled over six years.

On Thursday, Honda said it learned of a death in Houston, Texas that may have involved a Takata air bag explosion on a 2002 Honda Accord. The vehicle was recalled in 2011 but wasn't repaired, Honda said. The auto maker is investigating the matter.

Write to Yoko Kubota at [e-mail]

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