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Honda, Mazda Predict Earnings Squeeze
Honda Motor Co. and Mazda Motor Corp. say their earnings will be hurt this year by a stronger yen.
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Honda Motor Co. and Mazda Motor Corp. say their earnings will be hurt this year by a stronger yen.
Both companies expect to set new global sales records in the fiscal year that began this month. But Honda warns that its operating profit will fall 16% to 700 billion yen ($6.4 billion) during the period. Mazda expects its operating profit will plunge 28% to 105 billion yen ($1 billion).
Honda predicts the yen, currently at 109 per U.S. dollar, will strengthen to 105 from 111 last year. Reuters notes that some analysts say the ratio could narrow to 100.
Any shift toward a stronger yen raises the cost of vehicles and parts exported from Japan, thereby making such items more costly to overseas markets and less profitable to the company. Mazda is especially vulnerable because it doesn’t locally produce any of the vehicles it sells in the U.S.
Honda is far better positioned against currency fluctuations. It relies on four U.S. factories, plus one each in Canada and Mexico, to make about 95% of the cars and trucks it sells in the U.S. Since 2013, the company has exported more American-made vehicles than it imports to the region from Japan.
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