Japan’s third largest automaker, Honda Motor Co, decided to lower its core annual profit forecast by 6.5 percent for 2015 as it needs to factor in the hundreds of millions of dollars needed to cover the recalls stemming from the Takata airbag issue.
Reported third-quarter earnings were almost a 25 percent lower as it started to absorb the recall-associated costs – with Honda being the largest client of Japan’s auto safety supplier Takata Corp. The parts maker has been at the center of a growing global safety crisis, with is airbag inflators prone to rupture and exploding with too much force, sending metal debris flying at high velocity inside the cabin. So far, five deaths have been confirmed – all in Honda-produced vehicles – and a recent accident might add another fatality to the count. After previously predicting it would have a profit of 770 billion yen for the fiscal year ending March 31, the automaker now predicts it would only reach 20 billion yen ($6.1 billion). The company also set aside an extra 50 billion yen to cover quality-related issues, including the Takata airbag recalls.
While Honda’s Executive Vice President Tetsuo Iwamura said the company is not seeing “a big impact on sales in North America from the air bag issue,” the carmaker’s latest quarter earnings (the three months ending in December) dropped 22.5 percent to 177.2 billion yen from 228.57 billion yen in the same period a year earlier. Honda also lowered the sales outlook for the full fiscal year to a total of 4.45 million units, down from he 4.62 million it previously expected – with slowing deliveries in its home market to blame.