Honda Posts Quarterly Loss as Air-Bag Recall Costs Surge

TOKYO—Honda Motor Co. swung to a quarterly loss as ballooning costs related to recalls of Takata Corp.-made air bags outweighed strong vehicle sales in the U.S. and China.

The company posted a January-March net loss of ¥ 93.4 billion ($856 million), compared with a net profit of ¥ 81.9 billion in the same period a year ago.

For the current financial year ending March 2017, the auto maker forecast net profit to grow 13% to ¥ 390 billion. For the year that ended in March, Honda posted ¥ 344.5 billion in net profit, a 32% decline from a year earlier. Its full-year revenue was ¥ 14.6 trillion.

Honda, long Takata's biggest customer, has been the hardest hit among auto makers by rising costs related to recalls of Takata's air-bag inflaters.

Earlier this month, U.S. regulators ordered auto makers to recall up to an additional 40 million Takata-made inflaters in phases through December 2019. Some car makers have started to set aside funds to cover recall-related expenses.

Nissan Motor Co. recorded a ¥ 90.7 billion charge in the year that ended in March related to the air bag-recall costs, while Mazda Motor Corp. took a ¥ 40.7 billion charge for the same period. Subaru's Fuji Heavy has set aside ¥ 30 billion to cover possible costs tied to the recalls this financial year and expects to spend around ¥ 90 billion in total over the next three financial years.

The car makers are covering these expenses themselves pending an agreement between Takata on how to split the costs.

Japanese auto makers are also facing a potential turning point in the local currency.

Since late 2012, a falling yen buoyed exports and allowed companies to convert profits made overseas at a more favorable rate. However, the yen is strengthening, currently trading at around 109 to the dollar, compared with around 120 in early January. Auto makers including Toyota Motor Corp. and Fuji Heavy Industries Ltd., maker of Subaru cars, have forecast declining profits this financial year largely because of a rising yen.

Write to Yoko Kubota at [e-mail]

(END) Dow Jones Newswires

May 13, 2016 05:45 ET (09:45 GMT)

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