Honda slashes forecast again, Nissan cuts output

Automakers everywhere are under enormous pressure to cut costs and save cash to weather the storm as a global recession and tight credit hammer demand.

Honda said it would cut capital spending, delay new plants and product launches and reduce its third-quarter dividend as the strong yen compounds problems for Japanese producers.

In the United States, General Motors and Chrysler are awaiting word from the U.S. government on billions of dollars in emergency loans they say they need to avert near-term collapse.

Honda's local rival Nissan Motor Co announced further planned cuts in production and temporary staff in Japan. Honda, also the world's largest motorcycle maker, said it now expected an operating profit of just 180 billion yen in the year to March versus the 550 billion yen it forecast in October.

The new target would be down more than 80 percent from last year's 953 billion yen operating profit and was worse than the 300 billion yen reported earlier by the Nikkei business daily

NOT ENOUGH?
Investors said the brutal downgrade may still not be enough.

"The new earnings projections are worse than expected but still look tough to meet," said Toshiyuki Matsushita, chief investment officer at Bluebear Investment Managers.

"I would expect the company to issue another profit warning to reflect a stronger yen."

Honda revised its assumption for the dollar to average 95 yen in the second half, from 100 yen in October, but this is still more favourable than the current rate of 89 yen.

Every 1-yen swing in the dollar affects Honda's annual operating profit by about 20 billion yen ($220 million), cutting the amount of overseas earnings when translated back into yen.

Shares of Honda ended the day down 4.2 percent as investors braced for the profit warning after the company abruptly moved up its year-end news conference scheduled for Friday.

PRODUCTION CUTS
Honda said it now expected annual global sales of 3.65 million cars against a previous forecast of more than 4 million.

Like most car makers in the world, it has been announcing production and workforce reductions, so far scaling back output plans by about 200,000 units for this business year.

Rival Nissan, Japan's No.3 automaker, said it would cut a further 78,000 units from its local production, taking the tally for production cuts this business year to 225,000, or about 6 percent of its original 3.856 million unit forecast.

Nissan said the cuts at its three assembly plants and two engine factories in Japan would reduce its contracted short-term workers to zero by end-March, from 2,000 at end-October.

Toyota Motor, the world's largest automaker, is expected to cut its sales goal at its year-end news conference on Dec. 22.

The Japan Automobile Tyre Manufacturers Association forecast local vehicle production would fall nearly 9 percent in 2009 and sales would fall by more than 7 percent.

But in China, GM and its local partner SAIC Motor pushed ahead with the opening of a plant in the country's northeast.

China is one market where auto sales are still growing, albeit more slowly than previously.