Honda’s chief executive announced that the weakened U.S. dollar and the decreased U.S. sales have become a serious threat to Japan’s second largest automaker. According to the International Herald Tribune, Honda Motor’s net profit fell 7.5 percent in the last quarter with the net income falling from 137.1 billion to 127.1 billion.
Honda’s new President and Chief Executive, Takanobu Ito, seemed very worried about the decline as he mentioned phrases such as “danger zone” and “end of the line” when describing Honda’s current situation. The dollar fell to a nine-month low near 88 yen at the end of September, but have since recovered to about 90 yen. A strong yen reduces the value of overseas earnings for Honda and other exporters.
To avoid the currency exchange problem, Honda could create production facilities in the countries where their vehicles are sold, but Ito and others at Honda believe in keeping a strong manufacturing base in Japan which acts as its center of technology and engineering innovations.
Such innovations can be seen in vehicles such as Honda’s FCX Clarity hydrogen fuel cell vehicle, which was available for lease in Southern California last year. Before the release of the quarterly balance, Honda also announced their plan to reveal an all-electric vehicle at October’s Tokyo Motor Show, which would be for sale in the U.S. in 2015. This was a part of Honda’s plan to meet stricter mileage standards that will take effect for the 2016 model year. With U.S. environmental regulations expected to toughen, particularly in California, Honda was all set with plans for their new prototype.
Ito said that while Honda is still pursuing all-electric vehicles, they are in no hurry. Honda now plans to focus on hybrid technology such as its hit car, the Insight hybrid. The focus on hybrid technology began when Honda announced its $424 million investment in hybrid and fuel cell vehicle research in 2008 to meet the growing demand for environmentally-friendly vehicles and to keep up its sales momentum. This focus on cars of the future led to the development of the second generation of the Insight, which was the first hybrid to become Japan’s best-selling vehicle. Honda has also announced the launch of the CR-Z, their hybrid sports utility vehicle, in February 2010, as well as the Fit hybrid, which will be released for sale in October 2010.
Honda has managed to keep up with the competition throughout the years, but with the reduced U.S. sales, the company is being forced to reevaluate which innovations hold the most potential value. Ito said, “From now on, we would like to tie our business growth with our hybrid products and the global marketing of our compact cars.”
Despite the hardships that Honda is facing, the company is expecting to be profitable this year and to continue producing new and innovative vehicles to meet consumer and government needs.