February 1, 2019 / 6:35 AM / 5 months ago

Honda plans to front-load UK production ahead of Brexit

TOKYO (Reuters) - Braced for a possible logistical nightmare when Britain leaves the European Union in March, Honda Motor Co Ltd said on Friday it was preparing to front-load some production at its plant in the country to ship overseas or build up inventories.

The Honda logo is seen on a Honda car displayed at the New York Auto Show in the Manhattan borough of New York City, New York, U.S., March 29, 2018. REUTERS/Shannon Stapleton

The Japanese automaker, which produces the Civic hatchback model at its factory in Swindon, southwest England, may face possible supply chain, production and distribution issues if Britain’s borders are disrupted from March 29, when the country is due to leave the EU.

“To avoid any possible disruptions at the end of March ... we’re making a number of preparations including front-loading some production to ship or step up inventories,” Honda Chief Operating Officer Seiji Kuraishi told reporters in Tokyo.

Carmakers in Britain have warned that their factories, which rely on the constant delivery of parts to enter production cycles, would be severely impaired if Britain leaves without a trade deal, forcing the need for customs checks at borders.

Earlier this month, Honda said it would stop its British operations for six days in April to help counter any disruptions resulting from a potentially chaotic Brexit.

Q3 PROFIT KNOCKED BY DISCOUNTING

Announcing its third-quarter results on Friday, Japan’s third-biggest automaker said increased discounting on its popular CR-V SUV crossover pushed operating profit down 40 percent in October-December, while quality-related costs and currency volatility also stung its bottom line.

Honda posted profit of 170.1 billion yen ($1.56 billion) for the quarter, tumbling from 284.5 billion yen a year ago and undermining a median estimate for 208.8 billion yen from 10 analysts polled by Refinitiv.

(Click here for an interactive chart on Honda's operating profit tmsnrt.rs/2HJvcTt)

Kuraishi said the company had increased discounts on 2018 model CR-Vs sold in North America, where inventories had built up towards the end of the year, to make room for the current year model.

Such discounting helped boost sales in North America to 498,000 units during the period, up from 491,000 a year earlier. While it managed to buck the trend of slowing demand in the United States, higher incentives slashed profitability in the region.

(Click here for an interactive chart on Japanese automakers' monthly vehicle sales in the U.S. and China tmsnrt.rs/2RjnBuA)

Honda’s global automobile sales came in at 1.41 million vehicles in October-December, versus 1.34 million a year earlier, boosted by rising sales at home and in Asia.

In China, another key market where sales have also cooled after years of growth, Honda sold around 1.43 million vehicles in 2018, down slightly on the previous year. While sales in the past few months have held up against an overall market slowdown, Honda was stung earlier in the year by a quality issue with its Civic sedan, the CR-V SUV crossover and other popular models.

Kuraishi said that he hoped to keep increasing sales in China this year, even as automakers in the world’s largest auto market brace for a tough 2019. Demand in China has cooled following years of strong growth as the country’s growing middle class snapped up new cars.

($1 = 108.8500 yen)

Reporting by Naomi Tajitsu; Editing by Christopher Cushing and David Evans

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