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Cost cutting at carmakers boosts profit

CARMAKERS Honda and Nissan reported surprise profits for the last quarter yesterday, as cost-cutting at the firms started to pay off, while Peugeot Citroen blamed a drop in sales for heavy losses.<br /><br />Honda&rsquo;s executive vice president Koichi Kondo said sales in the US, its key market, were falling short of expectations, and that it planned to spend about $300m (&pound;189m) more than anticipated in profit-eroding discounts to prop up sales of its mainstay Accord and Civic models.<br /><br />&ldquo;Conditions remain extremely severe in the auto market,&rdquo; he said,<br /><br />Honda, also the world&rsquo;s top motorcycle maker, posted an 88 per cent fall in operating profit to 25.2bn yen (&pound;162m) in the first quarter, but beat estimates.<br /><br />For the full year, Honda lifted its operating profit forecast to 70bn yen from 10bn yen, and net profit to 55bn yen from 40bn yen.<br /><br />Meanwhile, Nissan &ndash; which is 44 per cent owned by France&rsquo;s Renault &ndash; made an operating profit of 11.6bn yen in its first quarter. The figure was down 86 per cent year-on-year, but beat estimates.<br /><br />Unlike Honda, Nissan does not have a hybrid model to boost sales in Japan, and yesterday said it would redouble its efforts to bring a purely electric car to market in Japan and the US next year.<br /><br />It is also due to roll out a new entry-level car next year to attract budget consumers in the growing Chinese and Indian markets.<br /><br />In the short term, Nissan is focusing on returning to a positive free cash flow position by the end of this financial year through joint cost-cutting with Renault.<br /><br />Meanwhile, Peugeot Citroen, the second biggest French manufacturer, was particularly gloomy on the outlook for the European car market yesterday, as it reported a 20 per cent slump in vehicle sales and &euro;826m (&pound;710m) in operating losses, compared to a &euro;1.1bn operating profit for the same period last year.<br /><br />The firm said it does not expect the European car market to recover before the end of next year, but efforts to cut inventories improved its cash situation.<br /><br />It added that it expects full-year operating losses to be between &euro;1bn and &euro;2bn.