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Honda Profits Tumble 40%

Maker blames strong yen – but seafood subsidiary’s problems also hurt.

by on Jan.31, 2011

The Honda CR-Z - hurt by a strong dollar and the end of Japanese green car incentives.

Honda saw profits tumble by nearly 40% for the maker’s third quarter, largely due to problems with the weak U.S. dollar, but while sales are down, it upgraded its profit forecast for the full fiscal year, which ends on March 31.

Earnings for the October-December quarter slipped to 81.1 billion yen ($989 million), down from 134.6 billion yen a year earlier.  Quarterly sales of 2.11 trillion yen ($25.7 billion) were off 6%.

The maker has been hammered by a variety of factors, including the shift in exchange rates.  The rising yen has crimped sales in dollar-delineated markets, like the U.S., forcing the maker to either raise prices – and risk losing sales – increase incentives – or hold the line on prices and watch margins tumble.

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But there have been other problems, including a decline in home market sales triggered by the end of Japanese green car incentives.  And Honda’s net took a hit from a fluke problem with a seafood subsidiary that engaged in questionable business practices, last week triggering an apology from senior managers who warned of the impact on third-quarter earnings.  (Click Here for the full story on the seafood subsidiary’s problems.)