Page last updated at 07:49 GMT, Tuesday, 28 October 2008

Sharp fall in profits for Honda

Honda Civic Hybrid
Honda has warned of falling car sales in the US this month

Honda Motor has reported a 41% drop in three-month profits, hit by falling sales and the strengthening yen.

Net profit came in at 123bn yen ($1.3bn; £829m) for the three months from July to September.

Japan's second-biggest carmaker has cut its profit forecast for the full year to 485bn yen, down 19% on last year.

Honda is considered one of the better-placed carmakers to deal with the global downturn, thanks to its line-up of smaller, more fuel-efficient models.

But it is vulnerable to the strong yen, estimating that a fall of one yen in the dollar exchange rate cuts about 20bn yen from its operating profit.

The desire to consume is being hurt by the credit crisis
Koichi Kondo, Honda executive vice president

The dollar has fallen by about 16% against the yen since the start of the year.

The strong yen makes Honda's vehicles more expensive in the US, where its customers are already struggling with the economic downturn.

Honda has predicted that its US sales in October will be more than 20% below the level for the same month last year.

Its executive vice president Koichi Kondo said the fall in sales was not just across its light trucks and SUVs, which have been struggling as a result of higher petrol prices.

"Now passenger cars have started to fall too, and that seems to suggest that the desire to consume is being hurt by the credit crisis," he told a news conference.

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