Honda (HMC) Japan Cuts Production by up to 30% on Supply Issues
Honda Motor Co. Ltd., HMC recently notified that it would slash production by up to 30% in Japan, by next month, due to persistent supply chain and logistical issues.
Production at the company’s Suzuka plant, situated in western Japan, will be brought down by around 10% this month and by about 30% in early August.
Another assembly plant in Saitama prefecture will also see a production cut by about 10% early next month.
Honda had brought about adjustments in its production plan in May, stating a return to normal operations in early June. However, the continued impact of a tight market situation is withholding the automaker from realizing its plans.
In April, the company said that it was planning to cut production by about 50% on two lines of one of its domestic units in early May after bearing the brunt of chip shortage and pandemic related restrictions and lockdowns.
It was also announced that the Suzuka factory would reduce production by half, for the month of April.
It was decided that the Saitama prefecture would also bring down production by a third, in April but intended to spring back to normalcy in early May. However, it could not stick to its original plans.
Moreover, in May, a 7% fall in annual earnings was forecast by the company instead of an expected rise. Honda had stated that the long-drawn chip crunch and escalating cost inflation were negatively impacting profit.
Therefore, it is not unusual that Honda has resorted to a production reduction.
Faced by a similar situation, another major auto player, Toyota Motor Corporation TM has also announced that its global production for August would be about 700,000 units, a fall of nearly 18% from its plans at the beginning of the year. Toyota had also said earlier in the year that it intends to halt production for the April-June quarter due to global supply-chain challenges. The auto giant brought about a 5.3% cut in vehicle production in May compared to the previous year, due to market disruptions.
The severe semiconductor shortage that has been dealing a blow to the auto industry since the beginning of the pandemic is still continuing and the situation has further worsened with the Russia-Ukraine war. A recent resurgence of lockdowns in China has added to the woes.
Shares of Honda have lost 19.1% over the past year compared with its industry’s 29.4% decline.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
HMC carries a Zacks Rank #4 (Sell), currently.
Better-ranked players in the auto space include American Axle & Manufacturing Holdings AXL and Standard Motor Products SMP, each carrying a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
American Axle has an expected earnings growth rate of 89.4% for 2023. The Zacks Consensus Estimate for current-year earnings has been revised 1.2% in the past 30 days.
American Axle’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. AXL pulled off a trailing four-quarter earnings surprise of 847.92%, on average. The stock has declined 10.7% in the past year.
Standard Motor has an expected earnings growth rate of 5.2% for the current year. The Zacks Consensus Estimate for current-year earnings has remained constant in the past 30 days.
Standard Motor’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters. SMP pulled off a trailing four-quarter earnings surprise of 40.34%, on average. The stock has risen 10.1% over the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Toyota Motor Corporation (TM) : Free Stock Analysis Report
Honda Motor Co., Ltd. (HMC) : Free Stock Analysis Report
American Axle & Manufacturing Holdings, Inc. (AXL) : Free Stock Analysis Report
Standard Motor Products, Inc. (SMP) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
