Honda president warns of hollowing out of Japan's auto industry

TOKYO, Dec. 19 Kyodo -
Honda Motor Co. President Takeo Fukui on Friday rapped the Japanese
government's ''slow'' response to the yen's recent sharp appreciation, saying
further rises by the currency would hollow out Japan's auto industry through
more job cuts and a shift of manufacturing, research and other activities
overseas.
While economic worries and tight credit have hit the global auto industry,
Japanese carmakers are also suffering from the yen's surge as this erodes their
earnings overseas.
Japanese government officials recently hinted at possible market intervention
to stem the rise of the yen, which has hit a 13-year high against the dollar,
but in reference to this Fukui said, ''They are too slow.''
''Did the Japanese government decide not to really care about exports? It seems
so to us,'' Fukui said in a press interview.
Earlier this week, the No. 2 Japanese automaker announced its third downward
revision of its group earnings forecast for fiscal 2008, slashing its net
profit projection by 62 percent from the previous estimate to 185 billion yen
due to plummeting global auto sales and a sharp rise in the value of the yen.
For the latest earnings projection, Honda assumes the Japanese currency's
exchange rate at an average 101 yen to the dollar in fiscal 2008, instead of
103 yen in its October estimate. On Friday, the dollar hovered around 88 yen.
For Honda, a rise of every one yen slashes its annual operating profit by 18
billion yen.
To cope with the yen's surge beyond 100 to the dollar, Honda is cutting
domestic production and jobs, Fukui said, adding the automaker may have to
shift not only production bases but also other activities like research and
development to overseas locations if the currency stays above 90 yen.
These moves would ''accelerate the hollowing out of Japan,'' he said. ''But
this is what a company should do'' to survive such a situation.
Honda is cutting about 1,200 non-regular jobs at its domestic production bases
by early February from around 4,500 in late November.
''If things do not change, the number (of temporary jobs) will fall to around
zero,'' Fukui said.
Tokyo-based Honda is projecting its global vehicle sales to fall 7 percent from
a year earlier to 3.65 million units in fiscal 2008.
It had earlier planned to boost sales to over 4.5 million units in fiscal 2010.
But given the current business environment, Fukui said, ''The scenario has
changed totally.''
Fukui said there is no sign of a recovery in the auto industry, and expressed
high hopes of measures by the incoming U.S. administration of Barack Obama to
alleviate tightened auto loans in the United States, Honda's largest market.
While sharply cutting investment plans for plants and R&D and withdrawing from
Formula One motor racing activities, Honda plans to focus its business
resources on hybrid and smaller cars to increase its line-up of
environmentally-friendly cars.
''There is no doubt that fuel-efficient and smaller cars will be the wave'' of
the future, he said, vowing to accelerate development of smaller diesel cars
and cheaper hybrid cars.
Honda plans to launch the Insight hybrid next spring at a price of less than 2
million yen, more than 300,000 yen lower than the lowest priced Prius model of
Toyota Motor Corp.
==Kyodo