Honda’s Profit Falls 12% on Weak Yen, XM Loss

Honda Motor Co., Japan’s third-biggest automaker, said fiscal third-quarter profit fell 12% after the yen weakened more than the company expected and after it posted a loss on its XM Satellite Radio Holdings Inc. investment.

Net income fell to 133.1 billion yen ($1.13 billion), or 144.81 yen per share, in the three months ended Dec. 31 from 150.8 billion yen, or 161.78 yen a share, a year earlier, Tokyo-based Honda said. The company raised its full-year profit forecast 24% to 605 billion yen, citing a one-time pension fund gain.

Honda gets as much as 70% of its operating profit in the U.S., where it ranks fifth among automakers by sales. The average yen rate in the quarter was about 6% weaker than its projection, triggering currency losses that helped mask an increase in operating income.

Sales in the quarter rose 16% to 2.47 trillion yen. Operating income climbed to 195 billion yen.

The biggest contributor to Honda’s drop in net income was a loss on its XM Satellite investment totaling 37.3 billion yen ($317.9 million), Oshima said. XM Satellite is the biggest satellite radio company in the U.S., with about 6 million subscribers. Honda owns 8% of XM.

The company’s third-quarter auto sales fell 0.1% to 816,000. In North America, vehicle sales rose 7.7% to 434,000. In Japan, sales fell 9.8% to 156,000.

Honda said its U.S. sales might rise 4% in 2006 to 1.51 million vehicles. Fuel-efficient models such as the Civic boosted Honda’s U.S. market share to a record 8.6% in 2005.