Honda won't offer zero pct financing in U.S.
TOKYO (Reuters) - Honda Motor Co (7267.T) will lower auto loan rates in the United States to help stem a slide in car sales but will not follow rivals into zero-percent financing, its chief financial officer said on Tuesday.
U.S. industry-wide sales plunged 32 percent to a 25-year-low of a seasonally adjusted annualized rate of just under 10.6 million vehicles in October, as worries over the economy and tighter credit kept consumers away from showrooms.
In a bid to reverse the trend, Toyota Motor Corp (7203.T) has extended a zero-percent financing offer it had launched in October, while Nissan Motor Co (7201.T) began its own zero-percent offer for November and December.
Detroit's General Motors Corp GM.N said it would roll out a "Red Tag" sale with lower vehicle prices and cash-back offers starting on Tuesday. "We're not planning any zero-percent financing," Honda's Yoichi Hojo told Reuters in an interview a day after Japan's No.2 automaker recorded a 25 percent drop in U.S. sales for October.
Hojo said, however, that Honda would offer lower financing rates of 1.9 percent from around 2.9 percent previously. It began offering the reduced rate on the popular Civic late last month, he said.
"Our inventory level for the Civic is still on the low side, but competition is heating up dramatically," he said, adding that Honda would also take other steps to support crumbling sales of the Accord.
Honda, along with most of its domestic rivals, last week slashed its profit forecasts for the business year to March 2009 to factor in weaker-than-expected demand mainly in the United States and Europe.
While it lowered its forecasts for North American shipments by just 10,000 units for this year, Honda expects retail sales in the United States to be 65,000 vehicles lower than original projections, at 1.51 million units this year, Hojo said.
"It'll be difficult to expect a recovery in North America and Europe in the next six months," he said. "And it's even more difficult to predict what path the emerging markets will take."
Hojo said Honda had drawn a cautious scenario for vehicle sales trends when coming up with its revised profit forecasts, but acknowledged that exchange rates presented a risk.
Honda set its dollar and euro assumptions for the second half of the business year at 100 yen and 135 yen, where the currencies averaged in October. On Tuesday, the dollar was trading around 99 yen and the euro was around 124.5 yen.
"We're hedged to some extent, but not on the operating level," he said.
At the non-operating income level, Honda is shielded up to 80 percent through the October-December quarter with a forward contract of 106 yen to the dollar and 152 yen to the euro.
Honda lowered its annual operating profit forecast last week by 13 percent to 550 billion yen -- a level most analysts consider optimistic in view of the pace of sales declines around the world.
Honda cut its net profit forecast only slightly, to 485 billion yen from 490 billion yen, thanks to a fall in the expected tax rate and solid earnings from China, which are counted outside the operating level.
(Editing by Edwina Gibbs)
