Japan quake to hit Toyota, Honda balance sheets

JAPAN’S biggest car manufacturers are expecting substantial falls in net income for the current financial year ending March 31, 2012 – including a 31 per cent drop at Toyota and a 63.5 per cent plunge at Honda – as a result of the devastating earthquake and tsunami in March, despite ramping up production in the months ahead to make up for lost output.

Nissan and a few other Japanese brands are still to issue forecasts, requiring more time to fully assess the impact of production losses and financial consequences stemming from the disaster.

However, Mitsubishi and Mazda have bucked the general trend.

Mitsubishi has forecast a 28 per cent increase in net income to ¥20.0 billion ($A233m) in the face of several negative factors – a strong yen, increasing raw material prices and uncertain short-term economic environment in Japan, among them – and for the time being is leaving its three-year ‘Jump 2013’ mid-term business plan unchanged.

Although the company is expecting no sales growth in Japan for the current financial year, Mitsubishi has forecast increases of 15 per cent in North America, four per in Europe and 13 per cent in Asia and other regions, for a total nine per cent global sales volume increase to 1,075,000 vehicles.

Mazda, meanwhile, expects to scrape back into the black this financial year with a forecast ¥1 billion ($11.8m) net profit – a big swing from last year’s ¥60 billion ($706m) loss – although it still has rocky ground ahead, predicting a ¥35 billion loss for the first half (ending September 30, 2011).

Mazda, too, is expecting growth in emerging markets, and last Friday also announced plans to build a new $US500m factory in Mexico, which will have an annual production capacity of 140,000 units (starting with the Mazda2 and Mazda3) when it comes on line during the 2013 financial year.

The company’s global sales volume is forecast at 1.3 million for this financial year, with a five per cent fall in Europe expected and little or no growth in Japan, North America and ‘other’ markets combined – save for China, which is forecast to increase 14 per cent to 270,000 units and topple the US as Mazda’s biggest market.

From top: Forthcoming Honda Civic sedan, Honda Accord Euro, Mitsubishi Global Small concept, Mitsubishi Triton.

The news from Japan’s biggest car manufacturer, Toyota, is bleaker, with net income expected to fall 31 per cent to ¥280.0 billion ($A3.27b), down from ¥408.1 billion ($A4.76b) last year and due largely to earthquake-related factors, particularly supply shortages.

Despite shutting plants in Japan for weeks after the March 11 quake, Toyota now believes its production for the financial year will increase slightly over 2010/11 – which included 220,000 units lost to the disaster in the final three weeks of last financial year – to 7.39 million worldwide across the Toyota, Lexus, Scion, Daihatsu and Hino brands.

Although a further 450,000 units have been written off for 2011/12, Toyota will now accelerate global production in the second half – churning out 350,000 more vehicles than originally planned – and aims to finish the financial year 48,000 units ahead of last year.

Global sales, however, are expected to fall one percent (or 68,000 units) to 7.24 million this financial year (down from 7.308m), which could see Toyota lose its number-one ranking to General Motors and even send it to third place behind the Volkswagen Group.

Japan’s second-biggest car-maker, Honda, has also forecast significant declines for its current financial year due to the ‘Great East Japan Earthquake’ and subsequent production setbacks due to restricted supply of parts.

Honda expects production to be back to normal in Japan by the end of June, with regions outside of Japan to be “nearly normalised” in August or September, and will emulate Toyota in ramping up production to recover sales.

Global vehicle sales, however, are expected to fall to 3.3 million units for the financial year – down 6.0 per cent and due in part to continuing component supply problems for certain models.

As such, Honda’s net income is expected to decline 63.5 per cent to ¥195 billion ($A2.28b), down from ¥534.0 ($A6.23b) last financial year.

Honda has cited a range of factors for the downturn. As well as earthquake-related issues, which include the cost of restoration and/or removal of damaged property and equipment, the company pointed to “unfavourable currency effects, increased raw material costs and increased R&D expenses related to the development of next-generation products and stepped-up development of environmental technologies”.

Nissan is still to detail its full-year forecasts after also suffering from the effects of the Japanese earthquake, but when delivering its fiscal year 2010 results – which included record sales of 72.6 million units and net income of ¥319.2b ($A3.73b) – chief executive Carlos Ghosn said last month that the company was “poised for a robust recovery”.

Nissan subsequently posted April production figures, which showed a 48.7 per cent decrease in Japan for the month (to 44,193 units) and a global production fall of 22.4 per cent to 248,024 units – results that were blamed unequivocally on the events of March 11.