Honda’s Operating Profits Fall on Airbag Recall Costs

Honda Motor Co.’s net income slipped 2% to 174 billion yen ($1.5 billion) in the fiscal second quarter ended Sept. 30.

But operating profits plunged by one-third to 153 billion yen ($1.3 billion). Much of the drop was due to a $471 million (54 billion yen) settlement fee for a U.S. lawsuit involving customers whose cars were equipped with defective Takata Corp. airbag inflators. This year’s operating profits also compare with year-ago numbers inflated by a one-time pension-related gain.

Honda’s revenue in July-September jumped 16% to 3.8 trillion yen ($33 billion). Unit sales for the period climbed 6% to 1.29 million vehicles. Honda says favorable exchange rates and surging sales in China and Japan buoyed revenue.

In North America, unit sales fell 6% to 452,000 vehicles. The decline, coupled with the cost of the airbag settlement, threw the unit into an operating loss of 660 million yen ($5.8 million).

Honda now expects its operating income for the full fiscal year will be 745 billion yen ($6.5 billion), up slightly from an earlier estimate but 11% below results in fiscal 2016. The carmaker forecasts that its unit sales for the period will advance only 5,000 units to 3.69 million vehicles, and revenue will grow 4% to 15 trillion yen.