Honda Gains Rise on Fuel-saving Cars

by : Anthony Fontanelle

The Honda Motor Co. announced last Wednesday that its first-quarter gains increased by 16 percent and such have been buoyed by demand for fuel-saving product lines in the United States and a weaker yen.

Additionally, net income of the second biggest Japanese automaker increased to ?166.1 billion, or $1.4 billion, in the three months ended June 30, as compared with its ?143.4 billion in 2006. Honda won customers in the United States, its biggest market, from domestics General Motors Corp. and Ford Motor Co. with its Civic compact cars and CR-V SUVs.

The Tokyo-based automaker earns as much as 70 percent of its operating profit in the United States and benefited from a 5.3 percent drop in the value of Japanese currency against the dollar in the quarter, reported International Herald Tribune. Honda's world-wide sales rose 5.6 percent to 946,000 vehicles from the same period last year.

Heat is building up and it must be controlled by a . As the competition gets even tougher, precise strategies are crucial. In June, Honda and the Toyota Motor Corp. increased production to meet rising demand from North America, Europe and Asia. Toyota raised global production 3.6 percent to 734,354 vehicles in June while Honda's global output rose four percent to 340,400 vehicles, the companies said in separate statements.

Toyota surpassed GM as the world's biggest automaker by sales in the first half of this year, bolstered by vehicle demand in the U.S. Honda increased its full-year sales and gain forecasts amid surging demand for its fuel- efficient Civic models, reported Bloomberg.

"Exports to North America have been strong,'' said Hirofumi Yokoi, an analyst at CSM Worldwide, an auto industry consulting firm. "Japanese and Korean carmakers will continue to grab market share away from Detroit.''

Toyota's overseas production rose 7.2 percent, while output in Japan increased by 0.3 percent to 368,513. The automaker's exports rose 9.6 percent to 242,101 and Honda exported 55,207 vehicles, down by 2.8 percent. Meanwhile, Honda's domestic production dived by 4.8 percent while overseas output climbed 9.2 percent, Bloomberg added.

Moreover, July domestic production is expected to decline as Japan's 12 automakers lost output of at least 120,000 vehicles after Riken Corp., Japan's biggest piston rings supplier, ceased production because of a July 16 quake in Niigata area. Carmakers will likely make up for the lost production by the end of the fiscal year, said Fujio Cho, the chairman of the Japan Automobile Manufacturers Association.

Even amid increasing raw-material costs and expenses related to new production facilities Honda's net is bolstered. The automaker said that its brisk sales and the positive effects of the weak yen, which helps Japanese automakers by increasing the value of overseas earnings when converted into Japanese currency, led to its net profit of 166.1 billion yen or $1.38 billion in the three months ended June 30, up from 143.4 billion yen in the same period in 2006.

Honda increased its net-profit forecast for the year ending March 31 to 625 billion yen, a 5.5 percent increase from the year earlier. Honda's estimates were based on a conservative exchange rate of 115 yen to the dollar. So far this fiscal year, the dollar has remained at about 120 yen, causing the car maker to recalculate its earning, said Amy Chozick, an automotive writer.

Last week, Chief Executive Takeo Fukui said that Honda will increase its capacity world-wide to meet demand. A new U.S. car plant will open next year with an annual capacity to produce as many as 200,000 vehicles. Honda expects annual production in North America to reach 1.62 million vehicles by the fall of 2008, up from 1.4 million cars this year.