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Honda Reports Record Q1 Results, Wards Off U.S. Tariff Impact

Honda Reports Record Q1 Results, Wards Off U.S. Tariff Impact
So far there has been limited impact of the U.S. steel and aluminum import tariffs on the bottom line of Honda Motor, the company said. The vehicle maker reported an increase in the profits for the second quarter which was the highest in over a decade. The record results were driven by North American sales.
The Japanese company also gave an outlook for its annual operating profit that was better than was previously being expected in terms. At the same time, the company also lowered its forecast for global vehicle sales because of Mexico floods which would bring down its output. And yet that lower number is expected to be a record high.
The record earnings and positive forecast of the number 3 automaker of Japan is very different from the not so encouraging forecast issued by a number of major automakers who have been impacted by increase in material costs. The projections are being further gloomed by the threat of U.S. tariffs on imported cars.
It was just last week that full-year profit forecasts were lowered by Detroit automakers General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles because of concerns over escalating tariffs hitting their sale and margins.
However, Honda has said that is had some respite in the US market – a major one for it, because of its strategy of localizing production and procurement.
“Roughly 90 percent of our steel and aluminum needs in the United States are procured locally,” Honda Senior Managing Director Kohei Takeuchi said at an earnings briefing on Tuesday. “Overall we’re not seeing a big impact (from tariffs) so far.”
There was an increase of 11.2 per cent in the operating profit for Honda at 299.3 billion yen ($2.69 billion) for the first quarter ended June which is the highest reported by the company since early 2006. It was also well above the average market estimate of 250 billion yen. The driver for this was a 3 per cent increase in its in global vehicle sales of which North America noted a 7.7 per cent jump.
In recent months, Honda focused on increasing production of its SUVs including its Pilot model, for the US sales which helped the rise in North America. This is a shift away from the earlier strategy of the company of focus on production of its mainstay Civic and Accord sedans which had seen dividing demands over the last few years.
The quarter noted lower sale for the company in Asia which is its largest market.
Honda said that it was retaining its annual target of selling 2.2 million vehicles in Asia despite the company noting a fall in demand and sale of its vehicles in sales in the largest car market of the world – China.

Christopher J. Mitchell

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