Honda’s Net Income Slips on Weaker U.S. Dollar

Honda Motor Co. on Wednesday blamed a weakening U.S. dollar for eroding profit in its fiscal second quarter, when net income dropped 7.5% to 127.12 billion yen, or $1.1 billion.

The exchange rate is crucial for the Japanese automaker because it books as much as 75% of its operating profit in the U.S. market. A second-quarter exchange rate averaging 110 yen per dollar, compared with 118 yen a year earlier, discounted the value of U.S. sales by almost 7%.

Revenue from sales of automobiles, motorcycles and power-generating products climbed 3.8% to 2.1 trillion yen in the quarter ended Sept. 30 from 2.02 trillion yen a year earlier.

Honda executives were cautious about the future, warning that soaring gasoline prices and the company’s continued use of profit-eating incentives could weaken revenue in the U.S., where Honda sells more vehicles than in any other market.

“There’s no room for optimism,” said Koichi Amemiya, president of Torrance-based Honda North America and executive vice president of the parent company. “The reality is that industrywide sales are being supported by incentives.”

The company’s U.S. sales chief, Tom Elliot, said in a recent interview that he expected sales of new or redesigned models -- including the 2005 Odyssey minivan and Acura RL sedan and the Honda Accord hybrid due this winter -- to boost Honda’s performance next calendar year.

For the first six months of its fiscal year, Honda reported net income of 241.38 billion yen, up from 239.18 billion yen a year earlier. First-half sales of 4.17 trillion yen were up 3.5%.

Honda’s U.S. shares rose 2% on Wednesday to $24.29 on the New York Stock Exchange.

Times wire services were used in compiling this report.