Honda posts surprise loss on back of product recalls

Honda yesterday posted a surprise net loss for its fourth quarter as its quality-related costs, mostly to recall Takata-made air bag inflators, nearly quadrupled for the full business year.

For the three months to the end of March, Japan’s third-largest automaker posted a net loss of 93.4bn yen (€755m), compared to the profit of 115.35bn yen expected by analysts.

Honda said its full-year results absorbed the impact of roughly 267bn yen more in quality-related costs than its original estimate after the US Transportation Department ordered an expansion of recalls to replace potentially deadly air bag parts made by Takata.

The company said it had set aside a total 436bn yen for air bag-related costs in the last business year, versus 120bn yen in the previous year.

The air bag inflators made by Takata have been blamed for at least 11 deaths, mostly on cars made by Honda, the supplier’s biggest customer.

US authorities said earlier this month that Takata must file new defect reports covering 35m-40m additional inflators that will lead to recalls by automakers.

Still, Honda forecast a 13.2% rise in net profit for the current year, with brisk global auto sales expected to offset the negative impact of a stronger yen.

It expects group profit to rise to 390bn yen from 344.5bn yen.