By Chang-Ran Kim
TOKYO (Reuters) - Honda Motor Co (T:7267) forecast a scant 0.4 percent rise in net profit for the year that began on April 1, after falling short of its guidance in the year just ended when quality problems delayed vehicle development and hampered sales.
Last year's profit shortfall was due about half to quality-related costs and half to weaker sales in the United States and Japan, Honda Executive Vice President Tetsuo Iwamura told a briefing for reporters.
Japan's third-largest automaker by global sales delayed the launch of new cars last year as it took more time on quality controls, after recalling the remodelled Fit hybrid car five times in less than a year in Japan.
Its quality problems have been compounded by the recall of millions of vehicles to replace air bag inflators made by Takata Corp (T:7312), its biggest air bag supplier. The scale of legal liabilities and repair costs remains uncertain, since the cause of at least some of the defects involving the component is still under investigation. All six deaths linked to Takata's inflators so far have been on Honda cars.
Honda is also under pressure in the United States, its biggest market, as cheaper fuel has shifted demand towards large SUVs and pickup trucks and away from the passenger car segment where it is strongest. Still, a string of new or revamped light trucks due over the next year and a half such as the HR-V, Pilot and CR-V should bode well for future sales, analysts said.
"We expect our U.S. sales to start recovering from the latter half of this business year with the launch of the new Pilot and Civic," Iwamura said.
Iwamura added that a West Coast labour dispute and a slower-than-expected start to a new factory in Mexico, to ensure quality, hurt Honda's U.S. sales in the latest quarter.
Honda projected a net profit of 525 billion yen (3 billion pounds) for the year through next March, based on U.S. accounting standards that it used until the just-ended financial year.
Honda is adopting international financial reporting standards (IFRS) from this year, and expects the same net profit under those standards. It is assuming a dollar rate of 115 yen and a euro rate of 125 yen.
For the final January-March quarter of the last financial year, Honda's net profit dropped 43 percent from the year before to 97.8 billion yen, compared with an estimated 121.65 billion yen according to Thomson Reuters StarMine's SmartEstimate.
