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Honda cuts profit guidance as recall costs, sluggish Japan sales bite

A sign is shown over the O'Hare Honda car dealership in Des Plaines, Ill.
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A sign is shown over the O'Hare Honda car dealership in Des Plaines, Ill.

Japan's Honda Motor on Friday cut its annual operating profit forecast by 6.5 percent as it set aside more cash to cover an expanded recall of cars to replace potentially faulty air bags made by supplier Takata.

Reporting its third-quarter earnings fell by nearly a quarter as it soaked up recall costs, Japan's third-largest automaker said it now expects an operating profit of 720 billion yen ($6.1 billion) for the year to March 31. It previously forecast 770 billion yen.

Honda also said it now expects to sell a total of 4.45 million cars this fiscal year, down from the 4.62 million it previously forecast, as Japan sales fall short of its original target.

In the three months ended December, Honda said operating profit skidded 22.5 percent to 177.2 billion yen from 228.57 billion yen in the same period a year earlier. That was below the 189.11 billion yen forecast by Thomson Reuters SmartEstimate from a poll of 10 analysts.