Honda makes money, others hope for better times

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DETROIT - Of the four big automakers that reported earnings Wednesday, only Honda Motor Co. made any money, but others reported that cash-for-clunkers incentives had boosted sales and they held out hope that the global auto recession may have bottomed out.

Honda, Japan's No. 2 automaker, bucked expectations of losses in the April-June period, posting a 7.5 billion yen ($79.8 million) profit on Wednesday. It raised forecasts for the full year on optimism auto sales will improve.

But Japanese competitor Nissan Motor Co., as well as Germany's Daimler AG and France's PSA Peugeot Citroen, all posted losses as poor sales worldwide continued to plague the troubled industry.

Honda's results for the April-June period were much better than the flood of red ink some analysts had forecast, although still marked a 96 percent on-year plummet in profit.

Still, making money in a global market that already has dragged U.S. rivals General Motors Co. and Chrysler Group LLC in and out of bankruptcy protection is a credit to Honda's management and marketing strategies, said Tom Libby, an independent Detroit-area auto analyst.

Honda has always been a conservative company, satisfied with slow growth and focusing its strategy on smaller, more efficient vehicles in all markets where it sells, Libby said.

In the U.S., Honda has stayed out of the larger pickup truck and sport utility markets which are risky when the economy is down, Libby said. And the company has kept its manufacturing footprint relatively small, he said.

"Their production strategy has always been to under build," he said. "Their strategy contrasts with Nissan and Toyota, which have not been as conservative."

Tokyo-based Honda, which makes the Insight hybrid and Odyssey minivan, raised its earnings forecast for the full year to a 55 billion yen ($585.1 million) profit from 40 billion yen ($425.5 million).

Other Japanese automakers, including Toyota Motor Corp., the world's biggest, are forecasting deep losses.

Nissan, Japan's third-biggest car maker, reported a smaller-than-expected 16.5 billion yen ($175.5 million) loss for April through June — the fiscal first quarter.

The results reflect tax breaks, cash-for-clunkers and other environment-friendly stimulus measures introduced by governments around the world, company executives said. Deep cost cuts also played a role, though the benefits were blunted by a stronger yen which reduces overseas profits.

PSA Peugeot Citroen, France's largest automaker, posted a €962 million ($1.37 billion) net loss in the first half and said it doesn't expect the European car market to recover before the end of next year.

The loss compares to a €733 million profit a year earlier.

The maker of the Peugeot 207 and Citroen's C4 Picasso said it expects to remain loss-making this year, after already losing €343 million in 2008. The company is shedding jobs and replaced its chief executive in March in a desperate bid to face off the worst crisis the car industry has faced in decades.

But Peugeot Citroen said incentives for scrapping old cars in some European countries gave a needed boost to lagging sales and led to increased production in May and June.

Germany's Daimler AG said Wednesday that it lost €1.06 billion ($1.51 billion) in the second quarter due to poor sales from the recession and charges related to its stake in Chrysler. But the company saw signs of a turnaround and its shares rose.

The loss in the April-June period compared with a profit of nearly €1.3 billion a year earlier.

Despite the third quarterly loss in a row, the company predicted a "gradual improvement" in its operating profit in the coming months.

Also Wednesday, Germany's Porsche SE said it anticipates a pretax loss of up to €5 billion in its 2008-2009 fiscal year, citing stock options in Volkswagen AG that is in advanced talks to sell.

The Stuttgart-based automaker said in a statement that it is in advanced talks about the sale of the "cash settle options with respect to Volkswagen shares," but did not say with whom.


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