Bolstered by a strong showing from its crucial U.S. operations, Honda Motor Co. reported surprisingly strong results for its fiscal third quarter Friday as profit jumped 31%.
Passenger vehicle sales in North America account for about 80% of Honda's profit, analysts say. Operating earnings in North America for the quarter rose 17%, largely on strong sales of Honda and Acura sport utility vehicles, the popular Honda Odyssey minivan and the boxy new Element.
Overall, Honda's unit sales in North America rose 4.9% to 407,000 vehicles.
As a result, Tokyo-based Honda posted a profit of $1.42 billion, or $1.48 a share, for the quarter ended Dec. 31, compared with $1.1 billion a year earlier.
Sales, though, rose just 0.2% to $18.7 billion. Honda's revenue was dragged down by a weak dollar and a sales slump in Japan.
Still, Honda's operating profit of $1.52 billion exceeded analysts' expectations of a $1.38-billion quarter.
Japan's second-largest automaker said its operating results were boosted by cost-cutting measures, including increased sharing of components among its various models, and by strong Asian and North American sales.
"If we were reporting in dollars, things would look really good," said Thomas Elliott of Torrance-based American Honda Motor Co. Honda is the second-largest import brand in the U.S., behind Toyota Motor Corp.
A weak dollar hurts Japanese car companies because it lowers the value of U.S. sales and profits when they are converted into yen. The value of a dollar has slid to 106 yen from about 116 yen a year ago.
Elliott said Honda had escaped another debilitating effect of a weakening dollar -- higher costs for imported cars and parts -- because almost 80% of the vehicles it sold in North America were made at its five North American manufacturing plants. Those factories use "90% to 95% locally made parts," purchased with dollars, he said.
It's not all smooth sailing, though. Sales of Honda's core passenger car, the Civic, have been falling for two years, and a new version of the compact car isn't due for at least a year. Honda also will be one of the last major car companies to enter the pickup truck market when it introduces its first pickup model early next year in the U.S.
The company plans this year to sell a redesigned Odyssey and a hybrid-powered version of the Accord combining a gasoline engine and an electric motor.
Those new products, Elliott said, should give Honda a slight U.S. sales increase in calendar 2004, to 1.4 million cars and trucks from 1.35 million in 2003.
The company also is considering moving into a new youth segment, recently plumbed in the U.S. by Japanese giant Toyota with its Gen Y-oriented line of Scion models.
Honda's results followed reports Thursday by Nissan Motor Co. and Mazda Motor Corp. of strong quarterly revenue. Analysts said both companies should meet full-year profit goals despite the weakening dollar. Toyota is scheduled to report its third-quarter results Thursday.
Honda's shares closed Friday at $21.34, up 48 cents, on the New York Stock Exchange.