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Honda faces 1st quarterly loss

HONDA Motor Co, confronting the first quarterly loss in at least 15 years, will scale back plans to make business jets and may offer voluntary retirements in the United States for the first time as it slashes costs.

The company will produce 70 to 80 jets a year for delivery from the end of 2010, compared with an earlier plan to make 100 planes a year, Chief Executive Officer Takeo Fukui said in an interview with Bloomberg News on Monday.

Honda, Japan's second-largest car maker, expects a loss of 243 billion yen (US$2.6 billion) in the current quarter as vehicle demand in the US and Japan plummets and a stronger yen erodes overseas earnings. The worst global financial crisis since the Great Depression has cut corporate demand for jets as firms curb perks for top management.

"In this political climate, it's hard to imagine executives jumping up and down and demanding jets to fly around in," said Ed Rogers, chief executive officer of Tokyo-based hedge fund adviser Rogers Investment Advisors Y.K. "This is the time you focus on core businesses and particularly profitable business lines."

Last week, Honda said it is considering postponing production of Jazz compact cars in the United Kingdom as vehicle sales plunge in Europe. The company is also eliminating 4,300 temporary jobs in Japan by April.

Honda gained 1.1 percent to 2,250 yen as of the close of trading in Tokyo yesterday. The shares have risen 18 percent so far this year against a 5-percent gain for Toyota Motor Corp and a 12-percent drop for Nissan Motor Co.

Honda, which expects an 87-percent plunge in net income in the year ending in March, may offer voluntary retirements or work-sharing in the US as the company cuts output, Fukui said, adding that no decision had been made. A work-share program would reduce workers' hours and pay to avoid job cuts. The company has already cut compensation for managers in Japan by 5 percent and board members salaries by 10 percent. Last week, Toyota, Japan's biggest car maker, said it will freeze wages and offer voluntary buyouts to plant workers in North America for the first time.

"We will do everything we can to generate a profit and pay taxes," Fukui said. "On top of that, protecting jobs is very important for us."


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