Honda Motor Co. (HMC) announced that it will build a plant in Mexico in order to manufacture small cars for the North American market. The company plans to invest $800 million in the plant, located near Celaya, Guanajuato, north of Mexico City.
The plant, expected to open in 2014, will produce up to 200,000 subcompact cars and engines annually, in order to tap the growing market for fuel-efficient vehicles. It will be the eighth auto plant in North America, employing 3,200 workers from the region.
Currently, the automaker sells subcompact Fit in North America, which is imported from its Japanese plants. The Fit is one of the most popular subcompacts in the U.S., selling 40,000 units of the vehicles through July this year.
This apart, Honda also revealed that it will restart a second shift at its plant in Marysville, Ohio, by the end of 2011 in order to increase production of Accord and Acura TL midsize cars. The automaker has also decided to add second shifts at its plants in Alliston, Ontario, and Greensburg, Indiana during September and October that make the Civic compact.
In the recent past, Honda has reduced its North American capacities by about half due to the parts shortage on the back of earthquake and tsunami in Japan on March 11 that destroyed many parts supplying companies and paralyzed the power supply system.
Honda, a Zacks #2 Rank (Buy) company, posted an 88.3% fall in profit to ¥31.8 billion ($394 million) or ¥17.64 per share (22 cents per share) in the first quarter of its fiscal year ended March 31, 2012 from ¥272.49 billion or ¥150.27 per share in the same quarter of prior fiscal year. The decline in profit was attributable to adverse impact from the earthquake and tsunami in Japan on March 11 and unfavorable currency translation effects.
Consolidated net sales and other operating revenues dipped 27.4% to ¥1.71 trillion ($21.24 billion) on the back of same factors outlined above, despite increase in revenues from the motorcycle business. However, at constant exchange rates, revenues decreased 22.7% from the prior year.
Consolidated operating profit plummeted 90.4% to ¥22.6 billion ($280 million) from ¥234.44 billion due to lower sales volume and model mix, increase in fixed cost per unit as output reduction and the unfavorable foreign currency effect, despite a fall in selling, general and administrative expenses.
The automaker has projected revenues to fall 2.7% to ¥8.70 trillion in fiscal 2012. Unit sales are expected to rise by 1.26 million to 12.71 million in the Motorcycle segment; fall 77,000 to 3.44 million in the Automobile segment; and go up 566,000 to 6.08 million in the Power Product and Other segment.
Operating profit expected to decrease 52.6% to ¥270 billion, profit is anticipated to decline by 56.9% to ¥230 billion and earnings per share is expected to be ¥127.61.
On the other hand, the company’s domestic rivalToyota Motor Corp. (TM) revealed a profit of ¥1.16 billion ($14.21 million) or 37 yen cents per share for the first quarter of its fiscal year ended March 31, 2012 that plummeted from ¥190.47 billion ($2.33 billion) or ¥60.74 per share a year ago.
The sharp fall in profit was attributable to substantial decline in vehicle sales all over the world, especially North America and Europe due to disruptions in supply of parts by the catastrophe in Japan.
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