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TOKYO, Jan 30:

Honda today slashed its full-year net profit forecast by 3.5% to US$4.6 billion (RM16.7 billion) in the face of soaring recall costs from an exploding airbag crisis linked to at least five deaths.

Sales in its domestic Japan and key China market also fell.

The Civic and Accord maker said it now expects a net profit of 545 billion yen (RM16.77 billion) for the fiscal year to March, compared with its earlier estimate of 565 billion yen.

In the third quarter, Honda’s net income dropped 15.1%.

It pointed to higher “quality-related expenses” as it recalls millions of vehicles due to the defect in supplier Takata’s airbags.

Honda said it cut its projections for the fiscal year to March owing to a “forecast decline in unit sales in Japan and China due to the difficult automobile market environment and a forecast increase in quality-related expenses mainly in North America.”

However, a sharply weaker yen has boosted the bottom line at Japan’s major automakers and Honda’s net profit rose 5.3% to 424.9 billion yen for the nine months through December.

A cheaper yen boosts the competitiveness of Japanese exporters and inflates their repatriated overseas profits, although the effect has been waning in recent months, analysts say.

Sales for the nine months rose 6.3% to 9.3 trillion yen, while operating profit fell 7.7% to 539.7 billion yen.

Demand in Honda’s home market suffered after Japan raised its sales tax in April, slamming the brakes on consumer spending.

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