Honda will halve vehicle exports

Strength of yen hurts earnings; plans to up Japan market output

BMW LONDON 

Honda Motor Co. plans to slash the proportion of vehicles that it exports from Japan by half or more in the next decade because the yen's strength is eroding its export earnings.

Honda, Japan's third-largest automaker, now exports between 30 percent and 40 percent of its Japanese-built vehicles, but expects that to decline to between 10 percent and 20 percent, Honda President Takanobu Ito said in an interview published Wednesday in the Asahi Shimbun daily.

Still, Honda expects to maintain domestic output at around 1 million vehicles per year, close to last year's output, by increasing production of mini-vehicles for the Japanese market.

Japanese carmakers are all boosting overseas output and holding the line on exports to counter the effects of the yen's gains against most currencies.

In the past five years, for instance, the dollar has slumped 35 percent against the yen, fetching 77 yen now, down from 118 yen in October 2006.

Honda already builds most of the vehicles it sells abroad in or near those markets.

In its last fiscal year, the automaker produced only 910,000 vehicles of its total output of 3.57 million in Japan.

"Honda currently exports 30 percent to 40 percent of its domestic production, but it is hard to sell overseas while fretting over currency movements," Ito was quoted as saying.

Honda will cut back production for export, he said, but it plans to more than double sales of small cars in Japan.

"Honda's decision to reduce its exports comes amid growing frustration among Japanese manufacturers and exporters over the continuing appreciation of the yen," said Paul Newton, a London-based analyst at consulting firm IHS Automotive.

"Automakers in particular have been reeling from the relentless rise of the yen, which reached a 10-year high against the euro on Oct. 4," on worries about Europe's economies, he said.

Despite the Japanese intervention in foreign exchange markets to drive down the yen, it hit a record high of 75.95 to the dollar in August.

Japanese prime minister Yoshihiko Noda has expressed fears of a possible "hollowing out" of Japanese industry as manufacturers shift production abroad to remain competitive.