本田技研 (HMC) 2019 Q1 法說會逐字稿

And thank you very much.

I'd now like to proceed to Q&A.

Those of you who have questions, please raise your hand.

Please wait until the microphone is brought to you.

Please state your name and affiliation before asking your question.

If anyone have any questions, please raise your hand.

The person in the front here, please.

[Okada] from Nikkei newspaper.

Can I ask all the questions at once?

Yes.

About Mexico, the flooding and the impact of the flooding.

What is the situation?

And how this has impacted your profit?

And cost reduction and SG&A reduction, you say, is the biggest factor for you making the revision in the full year forecast.

Well, there are production reforms and common chassis being introduced after Mr. Hachigo has become President.

Are these the contributors?

Or are there anything specific to this fiscal year?

Did you take any special cost reduction measures considering the decline in profit?

And also, this morning, and Denso has then said that the tariffs have had impact, but United States, if they were to increase the tariff by 25%, this would have this much impact and the trade friction impact.

Do you have any specific numbers or -- that you can reveal here?

Well, first, about the impact of the Mexico flooding -- about the impact of the flooding in Mexico.

Due to heavy rain, our Celaya factory experienced flooding and, as a result, had to suspend production.

Currently at Celaya, we are producing HR-V and Fit.

And after we decided to suspend production, we investigated the damage and we judged that it will require about 4 months to reconstruct.

Currently, we are planning to resume production at mid-November.

At our U.S. Indiana plant, the new Insight is being produced.

They are receiving engines from Celaya, but the supply will be delayed by 1 month.

About the transmission production at Celaya, which is globally supplied, we are able to resume production.

It resumed at -- on July 9 and production is at Guadalajara and therefore HR-V, Fit at Celaya.

And Insight at Indiana will be impacted by 55,000 units.

The impact of the full year is believed to be some JPY 50 billion, and this is reflected in our revision of our forecast.

Now there were no fatalities, injuries, and we are targeting towards the mid-November resumption of production.

That's all about Mexico.

About next, cost reduction.

Mr. [Ogata], I think you were talking about the JPY 50 billion impact.

We were able to correct the numbers but -- so operating profit is expected to increase by JPY 10 billion and -- from JPY 700 billion to JPY 710 billion.

The first quarter and second quarter impact of ForEx, we were considering JPY 105 against the dollar.

And we had produced our numbers.

But actuality is about JPY 109 against the dollar.

And also, the emerging economies' currency, yes, we were putting the budget assuming that it will be difficult, but the U.S. has increased its interest rate and the emerging economies' currency is appreciating, but I think it's more or less online.

But Argentina peso is fluctuating more than expected.

As for the Argentina peso, this also accompanies inflation.

And though there is currency impact, we don't believe that this will have a major impact on the revenue and we're thinking of a plus JPY 19 billion impact, excluding Argentina peso.

And motorcycle sales is doing well.

And our finance business in the United States, we believe that it is more positive, the residual value that we thought.

And the cost reduction was not something that came up suddenly, but instead, we've examined our cost reduction efforts.

And as a result, including the raw material cost, JPY 60 billion, and therefore, we have this projection of a JPY 10 billion increase in profit.

About the trade impact, I believe the third question was.

Well, Honda, ever since its inception, has had this policy to produce where the demand exists.

We have been promoting local production.

At this point in time, Section 301 impact is yet to be seen and therefore, at this point in time, we have no plans to transfer our offices or any other organization.

No change.

But we would like to set the situation carefully.

Yes, we -- in the United States, I think there is enough to impact when we talk about North America, but I think that we have to think how we would globally respond to this considering our global complementary system.

But at this point in time, I have nothing to say.

Is it right?

Yes.

The next question, please.

So, a lady over there, please?

[Monica] from [Toyokedaya].

I have 3 points.

First, about the sales in China.

Recently, I know that sales have been weak.

Japanese companies, cumulatively from January to June, you are the only one who is facing declining sales.

How do you think recover such sales?

Would you please give us your progress and current situation?

And for automotive sales unit, it was negative by 90,000, or partially because of Mexican flooding, but how about China and other regions?

Would you please specify these breakdowns?

And the second point, I ask about the China-U.

S. trade friction.

Local procurement ratio is high, we understand.

However, imported raw materials, aluminum and steel from China, what sort of impact did you foresee?

Would you please share that with us?

And actually, raw material prices are going up.

So would you please give us your view on that?

And the third point is about Sayama.

And I know that partially, you're going to keep the production.

So would you please elaborate that part also?

First about the China situation.

As you know, in China, there's a problem of dilution, CR-V, May 22; and Civic, July 16.

We started to address and started a recall.

In March and April, we suspended the sales and therefore, the orders dropped temporarily and we wanted to recover with other models.

However, over the previous year, there is a negative sales units.

And as recall has proceeded, now order is recovered, like 600 units.

That is 20,000 units per month.

It's a sort of a level of order we've recovered.

And as for the Civic, even though we announced the recall, but we haven't seen any impact on Civic so far.

So in China, from now on, new Accord and a new model will be introduced.

So I hope that China will be recovered from now on.

And we're not revising any forecast.

And the third question, about the sales unit volumes.

Well, as a whole, yes, there's a decline by 90,000.

But among them, 75,000 is attributable to the Mexican flooding impact.

And the other units, well not only because of China, but the Europe or EMEA, we faced some decreases.

Okay.

About this import tariff impact.

Well, for the part and component tariffs, in reality, what is happening now is that steel, aluminum imported from Canada to America, there will be -- it's already tariff is raised to 25% and 10%.

And of course, we try to produce the things where the demand is; however, 90% is procured in America locally and little from Canada.

And it's all up to the negotiation, so we cannot disclose that specific numbers.

But this time, we haven't received any significant impact.

And other related things from China, power product outboard engine, that has some tariff.

And from the United States to China, there are some parts and components transmissions, and that has some impact.

However, they are not really significant material impact on our profit.

So raw materials as a whole, well of course, we revised downward by JPY 20 billion from the previous announcement.

And the prices cannot be disclosed because of the negotiation.

However, steel, aluminum and plastics, resins and precious-grade metals, these might have some impact to some extent.

That's our forecast.

And about Sayama, July 30, there was an article entitled that the announcement was returned to be back to the -- state that Sayama will be continued.

However, our policy was already announced in October 4 that we're going to continue producing some core part in Sayama, so it is a wrong report that if we revised or changed our stance about the production of the Sayama.

And so of course, all the components cannot be shifted and transferred at that time.

And therefore, our completed vehicles could -- production could be shifted.

But afterwards, in a phased manner, parts, production will be shifted from Sayama.

So as I -- we already announced in the very beginning, first the full model production, and then the parts and components would be following in a phased manner, and we're following our original plan.

Thank you very much.

Any other questions?

The person over there, and up front.

Okamura from Automotive News.

I'd like to confirm one point.

The Mexican flooding impact, you say that there'll be a reduction of a unit sales projection by 75,000 units.

And you are saying that there will be a negative impact of some JPY 50 billion due to the delay and suspension of production in Mexico.

Is that correct?

Yes.

That is correct.

Any other questions?

Yes, please.

Nihon Keizai Shimbun newspaper, [Furukekawa].

I have 2 questions.

First, in the North America, you revised the forecast.

So 1.94 million units throughout the year.

But in the past, it was 2.01 million, the record high.

So you revised downward.

And it's true that you would attain the record high, 2.01 million, and it's because of the Mexican flooding impact.

So I'd like to confirm whether there is no negative impact from the U.S. market.

And about Sayama, you said that the parts and components would be shifted in a phased manner, but when do you think you're going to finish that?

And when are you going to close or stop producing in Sayama?

First, about the sales units.

In North America, due to the Mexican flood negative impact, there was a negative of 75,000 units.

And did we give up attaining the record-high production?

Well, in the sales people, they haven't given up yet.

They are doing their best.

However, due to the supply issue, we have to think about the production for the coming months because salespeople are very much motivated.

But as of today's number's concerned, that part is very hard to be recovered.

However, it's not due to the decline of the sales and about Sayama factory -- Sayama plant, as you asked.

First full model vehicle -- completed vehicle -- finished vehicles be transferred.

And then afterwards, parts and components in a step manner, but within 1, 2 years, we believe.

And afterwards, there will be a complete closure, as we already originally announced.

However, how are we going to utilize that site?

Well, we are still discussing about that and we have nothing to announce today.

Is it all right?

Okay.

Please, other questions?

Since there are no questions.

Just one more.

[Takahashi] from Asahi Shimbun newspaper.

[A meeting] last week held at the Automotive Strategic Conference, and they came out with a midterm proposal.

But as for the targets that the company has set, what are your comments on these targets?

Well, this meeting itself -- well this is -- as for team Japan, well, there was impression that Japan is lagging behind and therefore, there was a need to demonstrate Japan's technical power, and Honda included.

We think that we are top class, but including our electrification technology, (inaudible) and manufacturing skills, the company believes there is a need to demonstrate this to the outside.

And we believe automotive sector is at the center and therefore, I believe the company wanted to include automotive sector as one of the demonstrators.

Well, we have the 2030 vision at Honda.

And in 2030, 2/3 of our sales will be [electricified].

So I think that we, in terms of the direction, are consistent with what many are saying towards 2050.

But Honda, in addition to what we've been doing in Japan, we are doing global business.

And the key is, depending on the market or country, customers have diverse needs, and we have to satisfy these variety of needs.

We believe that this is of utmost importance.

And no matter how much we say our products are good, it's useless if our customers do not buy them.

So we have to first focus on the gasoline engine models, recognize the needs of our customers and continue to produce such models along with electrification.

The key for electrification will be batteries.

And in Japan, I think there are areas where we have to collaborate with others, and others where we have the compete with others.

In China, the Chinese government procures the materials so there's a difference there.

But I think the Japanese government is currently considering what it can do and try to reach a consensus.

And therefore, I think this is a good conference to discuss those issues.

Okay.

This is the last question.

Reuters, Shiraki.

Relating to the previous question, I have one point about the battery you talked about.

So about the new Automotive Strategy Conference hosted by (inaudible), within this year, government will take initiative.

So all the rare metals like cobalt would be jointly procured and there will be organization established for that procurement, I heard.

Are you going to participate in joining this procurement team?

And if not, you talked about China.

So for 2/3 will be EV in 2030, you said.

So how are you going to achieve that, by securing limited resources or raw materials?

Well, within that strategic conference, there were many things said.

But there wasn't any specific commitments expressed.

It was just a place for discussion.

And they are all disclosed to the public.

So as Honda, if necessary, we would like to join such a scheme.

However, batteries, there are some issues.

And we -- together with electric battery manufacturers, we are still already having discussion with them, not to be behind when we think about the trend as a whole.

So if necessary, we are going to join.

Well, that new organization has not been formulated, not established.

So as of today, it's not the place to say we're going to participate or not.

However, we do believe that it is a very important point.

Okay.

Thank you very much.

Well, here we would like to adjourn the (technical difficulty)