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.
Honda’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 (£189m) more than anticipated in profit-eroding discounts to prop up sales of its mainstay Accord and Civic models.
“Conditions remain extremely severe in the auto market,” he said,
Honda, also the world’s top motorcycle maker, posted an 88 per cent fall in operating profit to 25.2bn yen (£162m) in the first quarter, but beat estimates.
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.
Meanwhile, Nissan – which is 44 per cent owned by France’s Renault – 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.
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.
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.
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.
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 €826m (£710m) in operating losses, compared to a €1.1bn operating profit for the same period last year.
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.
It added that it expects full-year operating losses to be between €1bn and €2bn.