Honda reports no loss of earnings from Chinse strikes

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From Reuters:

A top executive at Honda Motor Co (7267.T) said on Thursday the Japanese automaker expects no impact on earnings, including for the current quarter, from a string of labour disputes in China.

Japan’s No.2 automaker has been forced to suspend production on and off at its four Chinese car factories since late May as workers struck its local parts makers demanding higher wages, causing supply disruptions and an output loss of about 20,000 vehicles.

Because earnings made in China are booked one quarter later, the impact of the production loss was expected to put pressure on Honda’s profits in the July-September second quarter of the business year.

But Chief Financial Officer Yoichi Hojo said the disruptions mostly resulted in a fall in inventory and had virtually no impact on profits.

“Our Chinese sales forecast for this year remains the same, at 630,000 units,” he told a small group of reporters.

He said Honda would make up for lost output during the July-September quarter.

While wages in China will rise by more than 10 percent, Hojo said the impact on the company’s earnings was minimal because labour costs accounted for just 2 percent of total manufacturing costs there. That ratio is a 10th of what it is in developing countries, he said.

Hojo said Honda’s sales in China remained strong, rising 6.6 percent to 34,525 cars at local joint venture Guangqi Honda in July, and up 21 percent at 22,163 cars at its other 50-50 venture, Dongfeng Honda.

Honda last week posted its highest-ever quarterly net profit, which includes earnings made in China, as sales grew in almost every market. It also raised its net profit forecast to 455 billion yen ($5.27 billion) for the full year to March 31, 2011, from 350 billion yen