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July 30, 2009

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Ecological approach works for Honda

HONDA bucked expectations of losses in the first quarter, posting a 7.5 billion yen (US$79.8 million) profit for the second quarter and raising forecasts for the full year on optimism that auto sales will improve.

The results for the April-June period were better than the flood of red ink some analysts had forecast, though profit was still down 96 percent, battered by slumping car sales and a strong yen, which offset benefits from cost cuts. Honda made a net profit of 173.3 billion yen in the same period in 2008.

The numbers show that Japan's No. 2 auto maker, known for its ecological small cars including the Insight hybrid and the Accord sedan, is holding up better than its rivals during the economic slump.

Governments around the world have introduced measures that aim to boost hybrid and other green-car sales as part of broader economic stimulus packages.

Tokyo-based Honda raised its forecast for the full year to the end of March 2010 to a 55 billion yen profit from 40 billion yen.

Other Japanese auto makers, including Toyota Motor Corp, the world's biggest, are forecasting deep losses for the full fiscal year. It reports earnings on August 4.

Also yesterday, Nissan reported a smaller-than-expected 16.5 billion yen loss for the fiscal first quarter and unveiled plans to build more cars in China.

Even with the raised forecast, Honda will be posting a 59.9 percent decrease in profit for the fiscal year, for the second consecutive year of slipping profits.

The previous fiscal year, Honda posted a 137 billion yen profit - a result that's dismal for once-booming Honda, reflecting the fallout from the financial crisis.

Honda's quarterly sales tumbled 30.2 percent to 2.002 trillion yen from 2.867 trillion yen a year earlier.

It sold 766,000 vehicles around the world during the quarter, down 20.4 percent, mainly because of crashing sales in the key North American market.

For the full fiscal year, Honda expects to sell 3.295 million vehicles globally, better than its April projection of 3.2 million. For the fiscal year ended March 31, Honda's global vehicle sales totaled a stronger 3.52 million vehicles.

With mature markets the United States, Europe and Japan stagnant, Honda is looking to new markets for growth. Honda said earlier this week that it posted record production in China for the first half of this year.

Besides making popular cars, such as the Odyssey minivan and Fit subcompact, Honda also makes motorcycles, small jets and the Asimo walking human-shaped robot.


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