Honda Profits Nosedive 90 Percent

January 30, 2009

So you've heard of huge profit falloffs in the twentieth, the thirtieth, even the fourtieth does a 90 percent drop in profit strike you? Kind of puts fear into the heart, as it has for Honda execs who have slash-and-burned their entire yearly forecasts based on a 90 percent drop in profit for the three-month period beginning last September 31 (the third quarter of Japan's fiscal year).

To be sure, this is only a quarterly result, and not representative of the entire year. 2008 was a whole lot nicer to Honda than this horrendous third quarter result alone. Still, weathering three months of business that bad can cause serious hemorrhaging to even the strongest companies, and it's a scary harbinger for everybody's 2009.

Japanese automakers face a one-two punch; a nasty sales downturn in the U.S. compounded by a sudden surge in the yen, which has risen to its highest levels against the U.S. dollar in 13 years. This is driving the cost of doing business sky-high for the Japanese.

Both Nissan and Toyota are expected to announce similarly grim news in the days ahead.

[source: Detroit News]

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