LexusLuver

Reuters / April 27 2004

TOKYO (Reuters) -- Hit by dismal domestic sales and a weaker dollar, Honda Motor reported a 17 percent drop in operating profit Tuesday and forecast a worse than expected year after being overtaken as Japan's second-ranked carmaker.

A day earlier, rival Nissan Motor Co. posted a 12 percent jump in annual operating profit as it sold more than 3 million vehicles to pass Honda and grab second place among Japanese carmakers in terms of global sales.

Japan's top automaker, Toyota Motor Corp., is also expected to rake in record profits when it reports next month, having attacked every major market with new products amid cutthroat competition.

While Honda expects the launch of high-margin cars such as the remodeled Odyssey minivan to spur sales at home this year, analysts said a slowdown in North American sales was a worry because the region accounts for four-fifths of operating profit.

Currency swings also hurt Toyota and Nissan, but with North America accounting for roughly 60 percent and 70 percent of their profits respectively, according to JP Morgan's estimates, Honda remains the most vulnerable to a softer dollar.

"They face a high hurdle in foreign exchange, which means that on paper their performance does not look as good," said Kurt Sanger, auto analyst at ING.

Sanger said that if Honda expected exchange rates to stay flat this year, it would have forecast a 17 percent rise in operating profit.

Assuming an eight-yen weakening in both the dollar and euro this year, Honda forecast a 6.7 percent fall in operating profit to 560 billion yen ($5.15 billion) for the current business year, far short of analysts' consensus estimate of $5.60 billion.

Unfavorable currency swings would lop off $1.27 billion from earnings, it said.

In the year that ended March 31, operating profit was 600.14 billion yen ($5.52 billion), compared with analysts' average estimate of 630 billion yen ($4.74 billion), as the dollar's fall helped to shave $921 million.

But net profit grew by 8.8 percent to a record $4.23 billion, thanks partly to robust earnings in China, which are not counted at the operating level.

Honda leads most automakers in the red-hot Asian market, where it has expanded successfully on strong brand recognition cultivated through its motorcycle business.

Revenue grew 2.4 percent to a record $74 billion as car sales rose 3.3 percent to 2.983 million units.

MORE LIGHT TRUCKS

After expanding its U.S. market share to 8.1 percent in 2003, Honda is expected to lag its Japanese rivals this year due to a lack of pickups and other light trucks -- a traditional strength of the U.S. Big 3, which Toyota and Nissan have been attacking aggressively.

Honda has responded by planning its own version of a pickup that it calls a sport utility truck, but that will only go into production in 2005. For this business year, it forecast North American sales to rise just 0.4 percent.

Executive Vice President Koichi Amemiya conceded that light trucks such as minivans and SUVs made up a relatively small portion of Honda's U.S. sales. But he added that the ratio would rise with the expansion of its Alabama plant.

"Last year, light trucks made up about 56 percent of the overall U.S. market, but only 39 percent of Honda's products," he said in a news conference. "But this year, we expect a contribution of 41 to 42 percent."

With that, Amemiya said, Honda would aim to lift its operating profit margin in North America to double digits.

Last year, the margin skidded to 6.6 percent from 9.4 percent the year before as Honda booked huge recall and warranty extension costs.

LexFather

Seriously, Honda is too small. Their product line is very limited compared to Toyota and Nissan. ALl their cars are built off other cars. This is not surprising.

jet864

Who would buy a honda truck? The pioneers in FWD are trying to build a truck... No chance it would be full RWD or even split biased AWD. At very best, front biased AWD. I say this because they're not gonna research new technology for a brand new vehicle that is gonna have to go up against the Titan, Tundra, and not mention the big American Three who INVENTED the pick up. And if they do, bad mistake. Man...I can only see those die hard Honda Pride type even considering buying a honda truck.

LexusLuver, where do you find all your articles? Just out of curiosity, if there were any negative Lexus ads, would you post them...?

James

mmarshall

Well, Honda will pick up some buisness soon by furnishing its 3.5L V6 for the new Saturn VUE Red Line.
That FWD Honda pickup should have come out long ago....Honda has delayed too long in getting into this market. I disagree with the earlier comments about there not being a market for this type of vehicle. Subaru has found a market for its Baja...which is generally the same thing....a Unibody vehicle with a grafted-on pickup bed and a sliding access panel. The only difference is that the Baja, like all Subarus, is AWD.
One other thing Honda / Acura has stalled too long on, too, is a full-size rear-drive V8 Acura flagship to compete with the LS430 and Q45.....THAT should have been done by now.

jet864

Truck people, and people that actually need trucks, (unlike these soccer moms in their SUVs) will not buy a FWD truck. The physics of the whole issue, hauling loads with FWD just does not make as much sense as the tried and true front engine R/AW drive system. I see true Honda diehards (maybe grown up civic modders?) buying this for status (big SUV), high ride, and capability to handle roads rougher than gravel. Also, with the luxury car segment, I don't believe Acura could truly make as big of a move as some predict with a V8 rear drive luxury sedan. Remember, the only reason Lexus, and to a smaller degree, Infiniti made a dent in the luxury sedan world is because they offered something the Germans couldn't. Lower prices, better rides, more efficient performance , all with no cost to luxury. It's been done and unless the Q falls off the map, it doesn't feel like there's room for another competitor in the segment.

James

mmarshall

Well, I guess we won't really know or not if a V8 Acura flagship would sell or not until it's actually tried. Interesting, though....the Germans have four ultra-high-class expensive cars now...the Mercedes S-600, the BMW 760iL, the Audi A8 (and S8) , and the VW W8 and W-12 Phaetons. (not counting the $300,000 Maybach...in an even higher class).
Ordinarily I would agree with you about the low prospects of a unibody Honda pickup, but almost ANYTHING with a Honda name on it sells.....Honda die-hards are some of the most loyal in the industry. They will buy almost anything with the " H " on the hood. The only Honda product that did NOT sell well (or hold up well either) was the Passport, which didn't fool anybody...it was a rebadged Isuzu Rodeo.
Guess only time will tell if a Honda pickup will sell or not. If it does not, I'll stand corrected.

LexusLuver

There isnt any bad news at Toyota, honest. Toyota/Lexus is riding a wave of seemingly endless love from automotive analysts. Since they have yet to lose sales or profits, there really isnt much bad to say. They also have a big $10+billion wad of cash sitting around.


I pulled that article from another forum.
I'm sure it's on detnews.com

doug_999

Sure LexusLover, just wait. What you will find out over time is that car manufacturers ride waves. BMW 4 years ago could do no wrong (they still easily outsell Lexus in cars - which is their focus). Today their designs are very controversial and they are at risk of losing their hard core audience (me included).

Toyota/Lexus have discovered that we love trucks here in the US and that's where they put their focus (remember, Lexus sells more trucks than cars). When trucks fall out of flavor their sales will probably drop.

What about Europe? Any clue why Lexus can't gain any traction there? I've got some ideas...

Finally, you post an article about Honda losing their focus - at the same time, why not post these two articles?
http://www.autodeadline.com/detail?s...74950&mime=ASC
http://www.autodeadline.com/detail?s...40148&mime=ASC

Doesn't look like they are losing much focus to me. Just seems like their focus is not the same as Toyota and I'm not sure that is a bad thing.

Gojirra99

Since you frequent this forum, I'm sure you have read that Lexus boss Denny Clements have already said that they'll put their focus back into cars in coming years, introducing coupe & convertible versions of their sedans as well as more engine choices, just like BMW and Mercedes. They don't sell as many cars as they should be now because they've only been in the lux segment for 15 years and can only introduce a limited range of models/engines in that short time period. That will be changed in the coming years. Same for Europe, which they've really just started to put more focus on. Given Toyota Corp. has enough resources to buy BOTH Daimler Chysler & BMW, I won't bet against them continuing to gain grounds.

doug_999

Don't get me wrong, I'm not sayng Toyota will fall - I'm just pointing out where their current focus is and that all car makers have their ups and downs. We can already see some of the focus back on cars with the new LS430 - I mean IT HAS A SPORTS PACKAGE! For as much as we knock BMW on this forum, I think we can thank them for that. Truth be told, I have not seen an 04 LS without the sports package option - both on the street and in advertising.

Your argument about being in the market only 15 years as the reason they don't seel as many cars as they should is however pure bunk - especially considering your last sentance about their resources.

Gojirra99

I don't think so. Their profits and resources have only skyrocketed to their present levels in recent years.

Realistically, you mean that Lexus should be able to offer as broad a model/engine range as MB & BMW when they start out 15 years ago ? or even 10, or 5 years ago ?

Now, if they don't deliver on their promise of broadening their product range and appeal in the coming years, you can then start to critize them for being overly conservative given their resources.

doug_999

I'll try to make this simple. BMW sells more cars than trucks. Lexus sells more trucks than BMW. BMW has been around longer than Lexus and yet they don't sell as many trucks - why? Because until recently they only focused on cars. Right now trucks are hot cars are not - witness Lexus car/truck sales of 2003 vs. 2002 (car sales down, truck sales up).

This has to do with focus and not model/engine choices.

Gojirra99

I have to disagree on that. Don't tell me if BMW were to drop all their coupes and convertible versions, and offer only the 330 engine in their 3 series etc.(like Lexus is now), their total car sales will remain the same.

LexFather

I agree Lexus sells more trucks. They sell 100,000 RX 330s a year. At say, an average of 40k each. That is A LOT of profit. And with all this profit, they can afford to re-invest in Lexus cars.

Lexus sells 260,000 vehicles with a limited lineup. Imagine if they went BMW/Benz's route with 5 diff choices for the same car? 300,000 would be sold easy.

NeverSatisfied

Honda needs to get the "less is more" mentality out of their heads if they want to stay competitive.