Honda to cut exports from Japan

Honda plans to reduce exports from Japan to as little as 10% of domestic production as the strong yen erodes earnings from overseas shipments.

Honda aims to sell 80% to 90% of Japan-made vehicles in its home market, spokeswoman Tomoko Uchida said. Last year, the carmaker shipped 310,254 vehicles, or 34% of its Japanese production, overseas.

Japanese carmakers including Honda, Toyota and Nissan are moving more production out of Japan to counter the effect of the strong yen. Honda plans to maintain domestic production of about 1 million vehicles a year, Uchida said, reiterating a previous statement by the company.

Source;
http://www.freep.com/article/20111006/BUSINESS01/110060539/Honda-cut-exports-from-Japan

Honda says studying shift overseas to avoid yen effect

* Working under assumption of 80 yen to dollar over next 3 years
* Exports from Japan unsustainable at current dollar-yen rate -CFO
* Discussion of shifting output to continue until last minute -CFO
* Not optimistic that yen will weaken -CFO
* Honda move could put pressure on Toyota, Nissan (Adds details)
By Chang-Ran Kim, Asia autos correspondent

TOKYO, Aug 9 (Reuters) - Honda Motor Co is studying possible production bases overseas to replace export-bound car production in Japan that has been battered by a strong yen, a top executive said on Tuesday.

Japanese auto executives have repeatedly warned that the yen had strengthened beyond what domestic exporters could cope with, but Honda Chief Financial Officer Fumihiko Ike's comment was the first indication so far that any concrete steps are being considered to reduce output in Japan.

"We currently have a three-year plan under which we are assuming a rate of 80 yen to the dollar," Ike told a small group of reporters at Honda's headquarters in Tokyo.

"And under that assumption, the discussion to look for an alternative production base is inevitable."

Ike tempered his comments by stressing that jobs in Japan needed to be protected, and that the discussion would continue right up to the point when the board makes a formal decision, taking into account exchange rates at that time.

But he said he was not necessarily optimistic that the yen would weaken, and that Honda was bracing itself for further appreciation towards 70 yen to the dollar after Japan's solo intervention last week did little to stem the dollar's fall. The U.S. currency was fetching around 77.00 yen on Tuesday.

"Protecting Japanese manufacturing and building cars here is becoming more and more difficult," Ike said. "We can keep the technology here, but if we were to build cars in Japan, they may be good (quality) products but they would be too expensive. And an expensive product is not necessarily a good product."

EXPORT EXPOSURE
Among Japan's top automakers, third-ranked Honda is the least exposed to excessive domestic production, exporting just 30 percent of its Japan-made cars last year. Toyota Motor Corp exported 53 percent, while Nissan Motor Co shipped 59 percent.

All three automakers have a basic strategy of creating a natural hedge against currency swings by producing as many cars as they can where they are sold. But for smaller markets where demand is insufficient to build a factory, production has been concentrated in Japan.

"At these exchange rates we lose competitiveness on these exports, and that leads to a fall in sales, triggering a vicious cycle," Ike said. "And when that happens, the natural consequence is for that production (in Japan) to disappear."

Ike said Honda had already gone down that path with motorcycles, expanding production in India, Vietnam and Indonesia. Honda imports many motorcycles into Japan from Thailand and China.

If Honda takes a similar step with cars, it could put pressure on rivals Toyota and Nissan to do the same and lead to a hollowing out of Japanese manufacturing, one of the main drivers of the country's economy.

Toyota and Nissan have been more vocal than Honda about protecting domestic production, with Toyota pledging 3 million vehicles a year of output in Japan and Nissan pledging 1 million.

Nissan said this week it plans to boost its sales in the shrinking Japanese market to keep the 1 million annual production target as it shifts more export-bound output overseas.

"Car makers are trying hard to cut costs to absorb the currency impact, but there's a limit to the speed and scope of what they can achieve," said Credit Suisse auto analyst Issei Takahashi.

"Even if they build a lot in Japan, if they lose money by doing so they won't be able to protect jobs. I think it's inevitable that some production shifts overseas." (Editing by Edmund Klamann)

Source;

http://www.reuters.com/article/2011/08/09/honda-idUSL3E7J922O20110809

Honda CEO warns strong yen to cripple Japan industry

* Says strong yen could prompt hollowing out of Japan industry
* Determined not to lower 08/09 profit forecasts again
* Aims to stay in black next year even if dollar around 90 yen
* 200,000-unit annual target for Insight hybrid may be tough
* Says sees no advantage of tying up with another carmaker

By Chang-Ran Kim, Asia autos correspondent

TOKYO, Dec 19 (Reuters) - The head of Honda Motor Co (7267.T) warned the strong yen could cripple Japanese industry and spur massive layoffs, and said the automaker would be forced to bring more production overseas if the dollar persisted below 100 yen.

"If the government is saying, 'We don't care about the export industry', then that's fine -- we'll act accordingly," Chief Executive Takeo Fukui told a small group of reporters in an interview on Friday.

Honda, Japan's No.2 automaker, this week slashed its operating profit forecast by two-thirds to 180 billion yen ($2 billion) for the business year to March 31, dragged down by an estimated currency loss of twice that amount.

Expressing frustration with Japanese authorities' slowness to act, Fukui said Honda had set long-term business plans at what was until recently a cautious assumption of a 100-yen dollar, and that any level below that would necessitate a fundamental rethink of the way the company operates.

"If we go beyond (100 yen), we would simply have to transfer more production overseas, cut more temporary workers and even start laying off permanent jobs," he said.

"Beyond that we could switch to importing more cars into Japan, bring research and development facilities overseas, and in an extreme scenario move our headquarters offshore. It would cause nothing short of a hollowing out of Japanese industry."

Under pressure to reverse the dollar's fall and an economy already in recession, the Bank of Japan on Friday cut its key policy rate to 0.10 percent and took other steps aimed at easing corporate credit strains. The dollar budged little, however, briefly falling below pre-announcement levels under 89 yen.

NO MORE REVISIONS

Fukui, who mapped out this week about a dozen steps aimed at saving near-term cash and focusing on core projects, said Honda was determined to meet its new profit forecasts after issuing its third profit warning this week.

"We don't want to revise again no matter what, so we issued our forecasts with that in mind," he said.

Honda changed its dollar-yen assumption for the second half to 95 yen, far more favourable than current levels, but Fukui said the assumption for the final January-March quarter factored in a rate of about 90 yen and presented little risk for now.

He added that the counter-measures announced this week, including delaying the start of a new domestic factory by more than a year, would help lower capital spending "significantly" next year from the 650 billion yen planned this year.

"We'll have to make sure we can secure profits next business year even if the dollar averages 90 yen," Fukui said.

NO NEED FOR TIE-UPS

Global automakers are reeling from a sales slump on scant availability of financing and weak consumer sentiment. In the United States, Honda's single-biggest market, the sales slide has spread even to fuel-efficient cars, such as Toyota Motor Corp's (7203.T) Prius hybrid.

With the timing of an economic recovery difficult to read, Fukui said Honda's annual sales target of 200,000 units for its new, low-cost Insight hybrid could be tough to reach after it goes on sale in North America, Europe and Japan next spring.

"We'll need to be more cautious about this target."

He stressed, however, that with governments tightening fuel efficiency and carbon dioxide emission standards, technology to develop better hybrid systems, smaller diesel engines, and a combination of the two, among others, would be even more crucial over the next few years.

In that sense, Fukui said, carmakers without the advanced technology would probably seek tie-ups, adding that Honda, an industry leader in such technology, wasn't one of them.

"At this point, I don't think there's any need or advantage for us (to form an alliance)," he said.

"In fact, there are risks involved in boosting volumes that way, because the partner could bail at any point, and it's also not good for Honda's dealers," he said, shooting down the possibility that Honda would drop its go-it-alone policy. ($1=89.17 Yen)

Source;
http://uk.reuters.com/article/governmentFilingsNews/idUKTKG00315820081219