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Honda Annual Report

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Honda Motor Co. , Ltd. Annual Report 2009 Annual Report 2009 Honda Motor Co. , Ltd. Year Ended March 31, 2009 Contents 2 3 6 8 18 The Power of Dreams Summary of Operating Results by Business Financial Highlights To Our Shareholders Review of Operations Motorcycle Business Automobile Business Power Product and Other Businesses Financial Services Business 36 37 39 46 49 81 Preparing for the Future Risk Factors Corporate Governance Board of Directors, Corporate Auditors and Operating Officers Financial Section Corporate Information Principal Manufacturing Facilities Honda Group Honda’s History Investor Information

Reports Published by Honda CSR Report This report provides an overview of Honda’s position on corporate social responsibility (CSR) activities and an overview of its performance in the areas of quality and safety, the environment, and the society during the fiscal year ended March 31, 2009.

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http://world. honda. com/CSR/ Driving Safety Promotion Report This report (available only in Japanese) summarizes Honda’s efforts to promote safe driving and principal activities in this area in 2008.

Annual Report This report outlines Honda’s operating performance for the fiscal year ended March 31, 2009. http://world. honda. com/investors/annualreport/ Environmental Report This report describes Honda’s position on environmental initiatives, its environmental performance for the fiscal year ended March 31, 2009, and future environmental targets. http://world. honda. com/environment/ecology/2009report/ Cover: Insight (right)

A five-passenger, five-door dedicated hybrid vehicle, the all-new Insight has been very well received by a wide range of customers due to an affordable price with exceptional fuel economy, fun-to-drive performance and efficient versatile packaging and featuring the Ecological Drive Assist System (Eco Assist) that can further enhance efficient vehicle operation while providing feedback related to individual driving styles. FCX Clarity (center) Designed as a dedicated fuel cell vehicle, the FCX Clarity is powered by the Honda V Flow fuel cell stack.

Thanks to the innovative layout of the fuel cell power plant, the FCX Clarity offers superior design, packaging and driving performance. Emitting no CO2 in operation, the FCX Clarity offers not only the ultimate in environmental responsibility but also real world performance and appeal. CR-Z (left) The compact sports concept of a lightweight hybrid sports car that demonstrates the flexibility of the unique Honda IMA hybrid system and features advanced technologies that deliver enjoyable driving for all while offering superior environmental performance. Corporate Profile Honda Motor Co. , Ltd. operates under the basic principles of “Respect for the Individual” and “The Three Joys”—expressed as “The Joy of Buying,” “The Joy of Selling” and “The Joy of Creating. ” “Respect for the Individual” reflects our desire to respect the unique character and ability of each individual person, trusting each other as equal partners in order to do our best in every situation. Based on this, “The Three Joys” express our belief and desire that each person working in or coming into contact with our company, directly or through our products, should share a sense of joy through that experience.

In line with these basic principles, since its establishment in 1948, Honda has remained on the leading edge by creating new value and providing products of the highest quality at a reasonable price, for worldwide customer satisfaction. In addition, the Company has conducted its activities with a commitment to protecting the environment and enhancing safety in a mobile society. The Company has grown to become the world’s largest motorcycle manufacturer and one of the leading automakers.

With a global network of 396* subsidiaries and 105* affiliates accounted for under the equity method, Honda develops, manufactures and markets a wide variety of products, ranging from small generalpurpose engines and scooters to specialty sports cars, to earn the Company an outstanding reputation from customers worldwide. *As of March 31, 2009 Caution with Respect to Forward-Looking Statements This annual report contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Such statements are based on management’s assumptions and beliefs, taking into account information currently available to it. Therefore, please be advised that Honda’s actual results could differ materially from those described in these forward-looking statements as a result of numerous factors, including general economic conditions in Honda’s principal markets; foreign exchange rates between the Japanese yen and the U. S. dollar, the Euro and other major currencies; and extensive environmental and other governmental regulations, as well as other factors detailed from time to time.

Annual Report 2009 1 The Power of Dreams Dreams inspire us to create innovative products that enhance mobility and benefit society. To meet the particular needs of customers in different regions around the world, we base our sales networks, research & development centers and manufacturing facilities in each region. Furthermore, as a socially responsible corporate citizen, we strive to address important environmental and safety issues. 2 Annual Report 2009 15 Summary of Operating Results by Business Percentage of Net Sales by Business Motorcycle Business 14. 1% Automobile Business 76. 7%

Power Product and Other Businesses 3. 4% Financial Services Business 5. 8% Annual Report 2009 3 Brazil 50 50 0 0 05 06 07 08 09 Yen (billions) Income (Loss) Yen (billions) Net Sales/Operating Unit Sales by Region (Thousands) Years ended March 31 1,600 Years ended Yen (billions) March 31 1,600 Sales Net Yen (billions) (left scale) 1,600 1,200 Yen (billions) 1,600 1,200 1,200 800 1,200 800 800 400 800 400 400 0 400 0 0 160 Yen (billions) Operating Yen (billions) scale) Income 160 (right 1,411 1,411 1,411 1,411 2007 2008 7,5232009 7,523 160 120 Yen (billions) 160 120 120 80 120 80 80 40 80 40 40 0 9 99 99 99 7,523 1,763 232 Japan 232 320 276 Asia Asia Asia 1,763 1,763 Other Regions Other Regions Other Regions 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 40 0 0 0 05 Yen (billions) 0 10,000 05 Yen (billions) 10,000 Yen (billions) 10,000 7,500 Yen (billions) 10,000 7,500 7,500 5,000 7,500 5,000 5,000 2,500 5,000 2,500 2,500 0 2,500 0 0 0 09Yen (billions) 1,000 09Yen (billions) 1,000 Yen (billions) 1,000 750 Yen (billions) 1,000 750 750 500 750 500 500 250 500 250 250 0 320 Europe North 276 America 320 Europe Japan 276 232 North America Japan North Europe America CZ-i 110 ,674 7,674 7,674 7,674 556 556 556 Japan Japan 350 350 North 350 Europe Europe Europe Asia Asia Asia 1,496 1,496 1,496 793 793 793 322 322 Other 322 Regions Other Regions Other Regions 24 24 Insight 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 250 0 0 0 05 Yen (billions) Yen400 05 (billions) Yen400 (billions) 300 Yen400 (billions) 300 400 200 300 200 300 100 200 100 200 0 100 0 100 -100 0 05 -100 0 05 -100 09Yen (billions) 80 09Yen (billions) 80 Yen (billions) 80 Yen (billions) 60 80 40 60 40 60 20 40 20 40 0 20 0 20 -20 0 -20 0 -20 -20 60 North 24America Japan North America 24America 43 343 343 343 -15 -15 516 516 1,893 1,893 1,893 1,306 1,306 1,306 Europe Europe Europe 970 970 970 Asia Asia Asia 502 502 Other 502 Regions Other Regions Other Regions -15 Pianta FV200 06 06 06 06 07 07 07 07 08 08 08 08 09 09 Japan -15 North 516 America Japan Japan North America North America 05 Yen (billions) -100 Yen600 05 (billions) Yen600 (billions) 09Yen (billions) 200 09Yen (billions) 200 Yen (billions) 200 150 Yen (billions) 200 150 150 100 150 100 100 50 100 50 50 0 Location 582 582 582 450 Yen600 (billions) 600 450 450 300 450 300 300 150 300 150 150 0 150 0 0 0 Germany U. K. U. K. U.

K. Germany Canada 582 80 Germany Thailand 80 80 80 Thailand Thailand Japan Japan Japan Canada U. S. A. Canada U. S. A. U. S. A. Brazil Brazil Brazil 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 50 0 0 0 Net Sales (left scale) Operating Income (right scale) Summary of Operating Results by Business Motorcycle Business Automobile Business Power Product and Other Businesses Financial Services Business Financial Highlights Financial Data Honda Motor Co. , Ltd. , and Subsidiaries Years ended March 31 Yen (millions except per share data) U. S. dollars (millions except per share data) 2007

Net sales and other operating revenue Operating income Income before income taxes, minority interest and equity in income of affiliates Equity in income of affiliates Net income Cash dividends paid during the period Research and development Total assets Stockholders’ equity Capital expenditures Depreciation (excluding purchase of operating lease assets) (excluding property on operating leases) 2008 ?12,002,834 953,109 895,841 118,942 600,039 152,590 587,959 12,615,543 4,550,479 654,030 417,393 ? 330. 54 84 2,507. 79 ? 2009 ?10,011,241 189,643 161,734 99,034 137,005 139,724 563,197 11,818,917 4,007,288 633,913 441,868 75. 0 77 2,208. 35 $ 2009 $101,916 1,931 1,646 1,008 1,395 1,422 5,733 120,319 40,795 6,453 4,498 0. 77 0. 78 22. 48 ?11,087,140 851,879 792,868 103,417 592,322 140,482 551,847 12,036,500 4,488,825 627,066 361,747 ? 324. 62 77 2,463. 69 Per share data Net income Dividends paid Stockholders’ equity Note: The consolidated financial statements as of and for the year ended March 31, 2009, have been translated into U. S. dollars at the rate of ? 98. 23=U. S. $1, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market on March 31, 2009. Those U. S. ollar amounts presented in the consolidated financial statements and related notes are included solely for the reader. This translation should not be construed as a representation that all the amounts shown could be converted into U. S. dollars. Net Sales and Other Operating Revenue Operating Income and Operating Margin Equity in Income of Affiliates 12,000 10,000 1,000 10. 0 120 100 80 750 8,000 6,000 4,000 7. 5 500 5. 0 60 40 20 250 2,000 0 05 06 07 08 09 2. 5 0 05 06 07 08 09 0 0 05 06 07 08 09 Operating Income (left scale) Operating Margin (right scale) Net Income and Return on Equity (ROE)

Total Assets, Stockholders’ Equity and Stockholders’ Equity per Common Share 12,500 10,000 7,500 2,500 2,000 1,500 1,000 500 0 Capital Expenditures and Depreciation (Excluding Property on Operating Leases) 600 600 20. 0 450 15. 0 400 300 10. 0 5,000 200 150 5. 0 2,500 0 0 05 06 07 08 09 0 05 06 07 08 Net Income (left scale) ROE (right scale) Total Assets (left scale) Stockholders’ Equity (left scale) Stockholders’ Equity per Common Share (right scale) 09 0 05 06 07 08 09 Capital Expenditures Depreciation 6 Annual Report 2009 Operating Data Years ended March 31 Unit Sales Breakdown (Thousands)

Motorcycles 2008 311 453 313 6,633 1,610 9,320 Automobiles Change 2008 615 1,850 391 755 314 3,925 Power Products Change (9. 6)% 2009 2009 556 2008 550 2,415 1,693 915 484 6,057 2009 516 Change (6. 2) % Japan North America Europe Asia Other Regions Total 232 (25. 4) % 320 (29. 4) 276 (11. 8) 7,523 1,763 10,114 13. 4 9. 5 8. 5 % 1,496 (19. 1) 350 (10. 5) 793 322 5. 0 2. 5 1,893 (21. 6) 1,306 (22. 9) 970 502 6. 0 3. 7 3,517 (10. 4)% 5,187 (14. 4) % Net Sales Breakdown Yen (millions) Motorcycle Business 2008 ? 93,592 265,609 226,687 484,418 488,390 ? Automobile Business 2008 ,209,446 1,182,666 1,048,463 727,811 Financial Services Business 2008 ? 23,405 483,925 13,234 4,936 8,053 ? 533,553 Power Product and Other Businesses 2008 ?147,775 109,445 96,847 39,449 27,678 ? 421,194 2009 Change 2009 Japan North America Europe Asia Other Regions Total 81,822 (12. 6) % 182,284 (31. 4) 178,621 (21. 2) 460,412 508,372 (5. 0) 4. 1 (9. 4) % ?1,321,005 ? 1,225,384 Change (7. 2) % 2009 ? 24,083 527,905 12,685 4,736 ? 582,261 Change 2. 9 % 9. 1 (4. 1) (4. 1) 9. 1 % 2009 Change ?115,252 (22. 0)% 80,124 (26. 8) 71,126 (26. 6) 50,739 28. 6 25,824 (6. 7) ? 343,065 (18. )% 3,723,877 (28. 5) 923,580 (21. 9) 1,079,585 721,978 3. 0 (0. 8) 12,852 59. 6 ?1,558,696 ? 1,411,511 ?9,489,391 ? 7,674,404 (19. 1) % Unit Sales Motorcycles (Thousands) Automobiles (Thousands) Power Products (Thousands) 12,000 10,000 4,000 8,000 3,000 8,000 6,000 4,000 1,000 2,000 0 05 06 07 08 09 Japan 6,000 2,000 4,000 2,000 0 05 06 07 08 09 Asia Other Regions 0 05 06 07 08 09 North America Europe Net Sales Motorcycle Business 2,000 Automobile Business 10,000 8,000 6,000 Financial Services Business 600 500 400 300 Power Product and Other Businesses 500 400 300 200 100 0 1,500 ,000 4,000 500 2,000 0 200 100 05 06 07 08 09 North America Europe 0 05 06 07 08 09 0 05 06 07 08 09 Asia Other Regions 05 06 07 08 09 Japan Annual Report 2009 7 To Our Shareholders Takanobu Ito President & Chief Executive Officer 8 Annual Report 2009 We would like to express our gratitude to you, our shareholders, for your ongoing support. We would also like to thank the many people who have supported Honda’s long-term growth, including, first and foremost, our customers as well as our business partners and the societies around the world where we are privileged to do business.

Business Environment Concerning the economic environment surrounding Honda during the fiscal year ended March 31, 2009, crude oil and raw material prices significantly increased worldwide in the first half, followed by declines in the second half. Although the economies in the United States and Europe continued to grow in the first half, they began to deteriorate in the second half, triggered by the financial crisis, creating a downward spiral leading to concern of even further deterioration of the real economy.

In Asia, although the economies of China and India continued to expand, the pace of growth slowed, and certain countries in the region went into recession. Japan showed signs of a rapid deterioration in economic conditions, such as decreased consumer spending and a decline in capital expenditures. Under these business conditions, Honda’s consolidated revenue for the fiscal year ended March 31, 2009 amounted to ? 10,011. 2 billion, a decrease from the previous fiscal year, primarily due to decreased unit sales in automobile business and negative currency translation effects. Net income declined to ? 37. 0 billion, and net income per common share decreased, to ? 75. 50. Annual Report 2009 9 To Our Shareholders Motorcycle Business Total unit sales of motorcycles rose, despite substantially lower sales in Japan, North America, Europe and certain other areas due to deteriorating economic conditions, as unit sales expanded in Asia and other regions including South America. In Asia, where market growth is continuing, sales expanded steadily as Honda strengthened its lineup, introduced models equipped with automatic transmissions, which are very popular in urban areas, and implemented other measures.

In Other Regions, which includes South America, sales of 125cc and 150cc motorcycles were strong in Brazil. On the other hand, in Japan, amid a difficult operating environment, sales of 50cc scooters declined, and, in North America, sales of off-road and all-terrain vehicles (ATVs) decreased from the previous year. Automobile Business Although unit sales increased in Asia and Other Regions which includes Brazil, total worldwide sales were below the level of the previous fiscal year because of declines in North America, Japan, and certain other markets.

In North America, the introductions of the all-new Pilot, Acura TSX, Acura TL and other models had a positive effect, but, as a result of the deterioration in the real economy triggered by the financial crisis, total unit sales declined. Also, in Europe, although demand increased in Russia and Eastern Europe, overall sales decreased because of lower unit sales in Western European markets, including the United Kingdom and Germany, as a result of the deterioration in economic conditions. In Japan, although the introduction of the new FREED, 0 Annual Report 2009 Odyssey, and Life models had a positive effect, unit sales declined because of the impact of the decline in consumer confidence accompanying the downturn in the economy. In Asia outside Japan, sales expanded as a result of the launch of the new City model as the trend toward driving smaller cars accelerated along with the rise in fuel prices and other factors. Also, in Other Regions, unit sales rose over the previous year as a result of the introduction of the new Fit model in South America and other factors.

Power Product and Other Businesses Total unit sales of power products decreased from the level of the previous fiscal year, despite increases in sales of engines for OEM use in construction in Asia and Other Regions. This decline was a result of lower sales of engines for OEM use in construction machinery, high-pressure washing equipment, and lawn mowers in North America, a decrease in sales of engines for OEM use in construction machinery and generators in Europe, and other factors.

Amid this environment, the Honda Group worked to strengthen its operating and financial positions to enable it to respond quickly and accurately to changes in the diverse needs of customers and society as a whole. On the other hand, to concentrate its limited corporate resources in business domains where they are necessary in the midst of rapidly changing economic conditions, Honda reviewed its investment and development plans and decided to implement a number of measures. We request the understanding of all interested parties regarding these decisions. Annual Report 2009 11 To Our Shareholders Initiatives Going Forward

Because of the sudden changes in the operating environment, Honda has made changes in some of its scheduled plans. However, we have not made any changes in our policy of emphasizing responsiveness to environmental and energy-related issues. We are, therefore, continuing to pursue the challenges of developing new products that will delight our customers and the creation and introduction of new technologies. Advancement of Advanced Environmental Technologies Honda was one of the first companies to position a reduction in CO2 emissions as a major issue linked to environmental preservation on a global scale.

We are moving ahead with initiatives to attain the goals we have set for ourselves for reducing CO2 emissions by 2010 in all of our products and manufacturing activities worldwide. There are many methods for reducing CO2 emissions, but in the automobile business, we believe that advancing hybrid car technology will be the most realistic and beneficial of various alternatives. In our new Insight hybrid car, which we introduced in February 2009, our originally developed IMA (integrated motor assist) hybrid system incorporated in the vehicle is designed for use in small cars and is light and compact and features superior fuel economy.

As a result of the development of a new platform, the Insight realizes the goals of offering both high performance as a hybrid car and substantial cost reductions necessary for a vehicle that will appeal to a wider market. We plan to strengthen our lineup of models with an eye to also offering mid- and largesized hybrid automobiles. In the field of motorcycles for traveling relatively short distances, we are proceeding with the development of an electric-powered motorcycle that will run on batteries, and, taking advantage of special features of this power source, will have zero CO2 emissions.

Our goal is to introduce these electricpowered motorcycles in about two years. 12 Annual Report 2009 Annual Report 2009 13 To Our Shareholders 14 Annual Report 2009 Further Advancement of Motorcycle Business The motorcycle business has performed solidly, even in the midst of the severe economic environment following the global financial crisis. Historically speaking, motorcycles have been strong in challenging times, and they have been a propelling force for Honda’s growth and expansion and one of its major strengths.

Especially in Asia, South America and certain other regions, motorcycles are essential for meeting daily transportation needs, and they are expected to show solid growth in the long term. We are working to increase our capabilities to respond flexibly to changes in the business environment by further strengthening our motorcycle business. Honda offers many models ranging from commuter models that provide daily transportation needs to large-scale models that meet individual rider tastes and preferences. Among these, the Super Cub C100 is a regular part of riders’ daily lives in a total of 160 countries.

Sales of the Cub series had reached a cumulative worldwide total of 60 million motorcycles by the end of April 2008, and the Super Cub has become the model that symbolizes Honda. Going forward, we will offer models worthy of the Honda brand that, following in the Super Cub tradition, will enable us to create new categories and new markets. Advancement of Honda’s Global Flexible Production System and Capabilities During the first half of the first decade of the 21st century, Honda introduced a production system that could respond flexibly to demand for a diverse range of models.

Following that, Honda expanded its overseas production bases to create a global, mutually complementary production system. Last year, in North America, we began operations at our Indiana plant in the United States and at our new engine plant in Canada. Also, in Asia, we began production at a second automobile plant in Thailand. Our goal is to focus on creating a “mature, flexible production system” that will provide us with advanced flexibility to respond nimbly, first to fluctuations in the economy and then to other changes and developments in the operating environment.

In addition to offering even higher-quality, more-attractive products to our customers around the world in the years ahead, we will be working to innovate with technologies and production systems that maintain our high standards of craftsmanship. Annual Report 2009 15 To Our Shareholders Returning Profit to Shareholders Honda strives to conduct its business from a global perspective and to increase its corporate value. We consider the allocation of profits to shareholders to be one of our most important management responsibilities.

Our basic policy for dividends is to make distributions after taking into account our long-term consolidated earnings performance. Honda also acquires its own shares with optimal timing with the goal of improving the efficiency of its capital structure. For fiscal 2009, Honda set a year-end cash dividend of ? 8 per share, bringing total cash dividends for the fiscal year to ? 63 per share. This dividend comprised ? 22 per share for the first quarter, ? 22 per share for the second quarter, ? 11 per share for the third quarter, and the previously mentioned yearend dividend of ? per share. For the fiscal year ending March 31, 2010, we plan to pay quarterly dividends of ? 8 per share, or ? 32 per share for the full year. We will continue to do our utmost to meet the expectations of our shareholders. Honda is a company where each and every member of management and the organization sets challenging objectives, works to realize the dream of providing joy to Honda customers as well as realizing his or her potential, and, while setting a course for a better tomorrow, wants to help shape the future through innovation and growth.

Our overriding desire is to be a company that society wants to exist. In the years to come, as in years past, we will continue to meet the challenges of innovation and creativity and, motivated by “The Power of Dreams,” respond to the expectations of society, giving our customers enjoyment, inspiration, and satisfaction. 16 Annual Report 2009 We look forward to the continued understanding and support of our shareholders and other investors for the long term. June 23, 2009 Takanobu Ito President & Chief Executive Officer 17 Thousands Years ended March 31

Review of Operations 12,000 8,000 4,000 0 Motorcycle Business Thousands 05 06 07 08 09 Years ended March 31 4,000 3,000 2,000 Years ended March 31 1,000 Unit Sales Thousands Japan North America Europe Asia Other Regions Total 0 2008 311 06 05 453 313 07 08 09 2009 232 320 276 % change (25. 4) % (29. 4) (11. 8) 13. 4 9. 5 8. 5 % % change (12. 6) % (31. 4) (21. 2) (5. 0) 4. 1 (9. 4) % Thousands Years ended March 31 8,000 6,633 1,610 9,320 2008 7,523 1,763 10,114 2009 81,822 182,284 178,621 460,412 508,372 07 08 09 ? 1,411,511 6,000 Net Sales Yen (millions)

Japan North America Europe Asia Other Regions Total 4,000 93,592 ? ? 265,609 2,000 226,687 484,418 488,390 0 05 ? 1,558,696 06 Yen (billions) Years ended March 31 600 Percentage of Net Sales by Business Unit Sales Thousands Net Sales 450 Years ended March 31 14. 1% Yen (billions) Years ended March 31 12,000 300 2,000 1,500 8,000 150 1,000 4,000 0 05 06 07 08 09 500 0 0 05 06 07 Japan 08 09 North America Europe 05 Asia 06 07 08 09 Other Regions Thousands Years ended March 31 Yen (billions) Years ended March 31 18 Annual Report 2009 4,000 10,000 3,000 7,500

Honda’s unit sales of motorcycles, all-terrain vehicles (ATVs), and personal watercraft (PWC) totaled 10,114 thousand units, increased by 8. 5% from the previous fiscal year. Unit sales in Japan totaled 232 thousand units, decreased by 25. 4%. Overseas unit sales totaled 9,882 thousand units, increased by 9. 7%, due mainly to an increase in unit sales of parts for local production at affiliates accounted for under the equity method in Asia and an increase in unit sales in Other Regions including Brazil. Revenue from external customers decreased ? 147. 1 billion, or 9. 4%, to ? 1,411. billion from the previous fiscal year, due mainly to negative foreign currency translation effects, which was partially offset by increased overseas unit sales. Honda estimates that, had the exchange rate remained unchanged from the previous year, net sales for the year would have increased by approximately ? 18. 5 billion, or 1. 2%. Operating income decreased ? 51. 3 billion, or 34. 0%, to ? 99. 9 billion from the previous fiscal year, due mainly to increased raw material costs, the negative foreign currency effects, and increased SG&A expenses, despite the change in sales price and decreased R&D expenses.

Annual Report 2009 19 Review of Operations Motorcycle Business JAPAN Total industry demand for motorcycles in Japan in fiscal 2009 was approximately 550 thousand units*, about 21% lower than in the previous year. Although sales of motorcycles in the 51cc–125cc class were strong, this decrease in demand was due mainly to restrictions on emissions of motorcycles, such demographic factors as the decline in the number of younger people, the decline in the number of people who acquire motorcycle driving licenses and the shortage of motorcycle parking spaces in city areas.

Amid these difficult operating conditions, Honda strengthened its lineup by launching the CB223S, a road sports model in April 2008, and an all-new 50cc Monkey leisure model for the first time in 30 years in February 2009 and newly introducing the VTR, a naked road sports model in March 2009. In addition, in July 2008, Honda launched the all-new CBR1000RR and the CBR1000RR-ABS, equipped with electronically controlled “Combined ABS” for super sports models.

In fiscal 2009, although sales of new models and the Lead 110 scooter were strong, Honda’s sales in all categories were lackluster because of more-intense market competition and other factors. As a result, Honda’s total sales for the year were down 25. 4%, to 232,000 units. In production activities, based on its concept of a “people-friendly and environmentally-responsible plant,” Honda introduced its latest cutting-edge, highly efficient manufacturing technologies. Also, Honda began production at its new Kumamoto Factory in April 2008, which will be the leader plant for worldwide motorcycle production. Source: Japan Automobile Manufacturers Association (JAMA) NORTH AMERICA Total demand for motorcycles and all-terrain vehicles (ATVs) in the United States* during calendar 2008 declined 16% from the previous year, to approximately 1. 33 million units. Although demand for mid-size motorcycles and scooters appears to have increased because of the increase in gasoline prices during the first half of the year, spending on recreational products shrank along with the emergence of the subprime loan issue, and market conditions deteriorated sharply following the financial crisis in September.

VTR (Japan) A naked road sports model, the VTR has undergone a full model change and become a higher eco-performance bike with a sporty design. Annual Report 2009 CB223S (Japan) A light road sports model with simple, basic styling 20 Amid this business environment, in August 2008, Honda entered a new market segment with the introduction of the multi-utility vehicle Big Red, which is suited for both utility and leisure. In September 2008, Honda also introduced a full model change for the CRF450R motocross motorcycle and the FourTrax Rancher AT-utility ATV.

Unit sales in North America declined 29. 4% compared with the previous fiscal year, to 320,000 units. In the motorcycle category, although sales of the Shadow cruiser model, the Ruckus scooter, and the Metropolitan scooter increased, sales of off-road and sports motorcycles decreased. As a result, Honda’s motorcycle sales in North America fell 22. 3%, to 188,000 units. In the ATV category, unit sales declined 37. 4%, to 132,000 units. Unit sales of both sport ATVs and utility ATVs for work use declined. * Source: MIC (Motorcycle Industry Council)

New production facility in the Kumamoto Factory EUROPE Total demand for motorcycles in Europe*1 during calendar 2008 declined 6% from the previous year, to about 1. 25 million units as a result of the economic downturn, particularly deterioration in consumer sentiment following the financial crisis in September. Amid this business operating environment, Honda introduced the CB1000R naked type sports bike offering a powerful and dynamic performance in May 2008 and launched the new model CBF125 naked type sports bike offering superior maneuverability at an attractive price near the end of 2008.

In fiscal 2009, although unit sales of the 110cc LEAD scooter, the XL700V, dual-purpose sports model and the CB1000R new sports bike were strong, unit sales of super sports models, small motorcycles, larger scooters, and certain other models declined. As a result, total unit sales in Europe were down 11. 8%, to 276,000 units. *1: The motorcycle registration market includes 10 countries: the United Kingdom, Germany, France, Italy, Spain, Switzerland, Portugal, the Netherlands, Belgium, and Austria. Cell assembly line in the Kumamoto Factory FourTrax Rancher AT (North America)

Features the first dual-clutch transmission on an ATV and a newly designed water-cooled engine XL700V (Europe) A dual-purpose sports model equipped with a V-type, twocylinder engine Annual Report 2009 21 Review of Operations Motorcycle Business ASIA Demand for motorcycles is continuing to expand in Asia, where they are an essential means of transportation. In calendar 2008, despite the unfavorable impact of declines in agricultural product prices in the second half of the year, total demand*1 for motorcycles in the principal countries of Asia rose approximately 6%, to about 37. million units, as a result of a strong economic performance in the first half of the year. By country, in India, sales were about 7. 4 million units, approximately the same as in the previous year. Unit sales were driven by a variety of factors, including the favorable impact of lower excise duties, which contributed to expansion in demand for motorcycles, and weak consumer confidence because of the deterioration of economic conditions from the latter half of the year. In Indonesia, sales for the year were up 33%, to about 6. 5 million units, oosted by increases in the farm household income and despite the tightening of credit criteria from the latter half of the year onward. Sales in Thailand rose 7%, to about 1. 7 million units, supported by favorable economic growth in the first half of the year, despite declines in agricultural product prices in the latter half. Amid these business conditions, in Thailand, Honda launched its CZ–i 110 family-sport model which offers a highly eco-friendly performance and low fuel consumption and the Click–i, equipped with an automatic transmission and PGM-FI (electronic fuel injection) in July 2008.

In addition, the Wave 110– i 110cc bike equipped with a new engine was launched in January 2009. The Wave series of motorcycles are a key lineup in Asia, with annual sales of about 2. 6 million units, in seven countries, mainly in the ASEAN region. Following the introduction in Thailand, Honda plans to introduce this Wave series lineup to the rest of the ASEAN region. In Vietnam, Honda introduced the Wave RSX in April 2008.

In India, Honda Motorcycle and Scooter India Private Limited, Honda’s wholly owned subsidiary, introduced the CBF Stunner 125cc motorcycle in June 2008 and the Activa scooter, powered by a new 110cc engine offering improved fuel economy in March 2009. CZ-i 110 (Thailand) With a newly developed 110cc FI engine, the CZ-i 110 offers an 18% improvement in fuel economy and a 25% increase in power. Annual Report 2009 CBF Stunner (India) With an appearance and equipment that are in a higher class, the CBF Stunner emphasizes style and drive feel. 22 In addition, in Indonesia, P. T.

Astra Honda Motor, a company accounted for under the equity method, launched the BeAT with an automatic transmission in June 2008 and the BLADE in December. Honda’s unit sales in Asia*2 for fiscal 2009 rose 13. 4%, to 7,523,000 units, due mainly to the favorable sales of the all-new CBF Stunner in India and the Air Blade, 110cc scooter in Vietnam. In production activities, in India, Hero Honda Motors Ltd. , a company accounted for under the equity method, began operations at its third factory in April 2008, thus bringing that company’s total annual production capacity in India to 6. 5 million units together with the capacity of Honda Motorcycle and Scooter India Private Limited. In Vietnam, Honda began the production of scooters and 125cc Cub scooters at its second plant in that country, and brought Honda’s total annual production capacity in Vietnam to 1. 5 million units. *1: The motorcycle registration market includes eight countries: Thailand, Indonesia, Malaysia, the Philippines, Vietnam, India, Pakistan and China. 2: This total includes sales of completed products of Honda and its consolidated subsidiaries and unit sales of parts to Honda’s affiliate companies accounted for under the equity methods for use in local production by such companies. Second motorcycle plant in Vietnam OTHER REGIONS In Brazil, the principal market within Other Regions, total demand in calendar 2008 increased to approximately 1. 91 million units, due to favorable economic growth in the first half of the year. In Other Regions (South America, the Middle & Near East, Africa and Oceania) consolidated unit sales rose 9. % over the previous fiscal year, to 1,763,000 units, due mainly to strong sales of new models such as the CG125 FAN and CG150 TITAN, in Brazil. Also in Brazil, Honda launched its CG150 TITAN MIX small motorcycle, equipped with its Mix Fuel Injection System in March 2009, which enables flexible mixture of bio-ethanol and gasoline fuels. This technology helps to reduce CO2 emissions and contributes to reduction in the burden of fuel costs. Activa (India) This is the first full model change for the Activa, a bike that has come to be admired and is in wide use. BeAT (Indonesia)

Offers compactness, advanced design, good fuel economy, and a pleasant ride CG150 TITAN MIX (Brazil) A compact motorcycle equipped with Honda’s original flexible fuels technology Annual Report 2009 23 Thousands Years ended March 31 Review of Operations 12,000 8,000 4,000 0 Automobile Business Thousands 05 06 07 08 09 Years ended March 31 4,000 3,000 2,000 Years ended March 31 1,000 Unit Sales Thousands Japan North America Europe Asia Other Regions Total 0 2008 615 06 05 1,850 391 755 314 3,925 07 08 09 2009 556 1,496 350 793 322 3,517(billions) Yen 2,000 % change (9. 6) % (19. 1) (10. ) 5. 0 2. 5 (10. 4) % March 31 Years ended % change (7. 2) % (28. 5) (21. 9) 3. 0 (0. 8) (19. 1) % Thousands Years ended March 31 8,000 Thousands 6,000 Years ended March 31 Net Sales Yen (millions) 12,000 Japan North America Europe Asia Other Regions Total 3 ? 31 ????????? 2008 4,000 ? 1,321,005 5,209,446 2,000 1,182,666 2009 ? 1,225,384 923,580 8,000 1,500 3,723,877 1,048,463 4,000 1,000 1,079,585 727,811 0 05 ? 9,489,391 06 07 08 721,978 09 500 ? 7,674,404 0 Yen (billions) Years ended March 31 0 05 600 06 07 08 09 05 06 07 08 09 Percentage of Net Sales by Business Unit Sales Thousands

Net Sales 450 Years ended March 31 Yen (billions) Years ended March 31 4,000 300 3,000 150 10,000 7,500 76. 7% 2,000 0 1,000 5,000 05 06 07 08 09 2,500 0 0 05 06 07 Japan 08 09 North America Europe 05 Asia 06 07 08 09 Other Regions Thousands Years ended March 31 Yen (billions) Years ended March 31 24 Annual Report 2009 8,000 500 400 6,000 Honda’s unit sales of automobiles totaled 3,517 thousand units, decreased by 10. 4% from the previous fiscal year. Unit sales in Japan totaled 556 thousand units, decreased by 9. 6%. Overseas unit sales totaled 2,961 thousand units, decreased by 10. %, due mainly to a decrease in unit sales in North America, which was offset in part by an increase in unit sales in Asia and Other Regions including Brazil. Revenue from external customers decreased ? 1,814. 9 billion, or 19. 1%, to ? 7,674. 4 billion from the previous fiscal year, due to the negative foreign currency translation effects and lower unit sales. Honda estimates that, had the exchange rate remained unchanged from the previous year, net sales for the year would have decreased by approximately ? 889. 9 billion, or 9. 4%. Operating income decreased ? 637. 1 billion, or 96. 3%, to ? 24. billion, from the previous fiscal year, due mainly to a decrease in income attributable to the decreased net sales in North America and Japan, the negative foreign currency effects, an increase in fixed costs per unit as a result of production cuts, increased raw material costs, changes in the model mix brought by shift of customers’ demands towards more compact and fuel efficient models along with expenses related to withdrawal from some racing activities and cancellations of development of new models, despite continuing cost reduction, the change in sales price, a decrease in quality-related expenses, decreased R&D expenses and reduced sales incentives in North America. 392 5 6. 8% 7. 5% 9 4,893 6,616 10. 4% Annual Report 2009 25 Review of Operations Automobile Business JAPAN Total automobile demand in Japan*1 (as measured by the number of regular vehicle registrations (661cc or higher) and mini-vehicles (660cc or lower)) for the fiscal year showed approximately 12% decline compared with the previous year to 4. million units, reflecting the decline in demand as the financial crisis began to have an impact on the economy from September 2008. Of this total, regular vehicle registrations declined approximately 16% from the previous year, to about 2. 89 million units, as the global financial crisis began to have an impact on the real economy. Sales of mini-vehicles held relatively stable because of the favorable effects of the introduction of new models by various manufacturers and the increasing trend toward driving smaller cars, however, from November 2008 onward the economy moved into a downturn, and mini-vehicle sales for the fiscal year fell 4% from the level of the previous year, to 1. 81 million units.

Amid these business operating conditions, Honda worked to strengthen its product lineup by introducing the new model FREED, a brand-new compact minivan that is easy to handle and offers a spacious cabin with stylish design in May 2008, a new version of the Odyssey minivan in October, and the all-new Life in November. In addition, in February 2009, Honda launched the Insight, a brandnew hybrid vehicle that incorporates a lightweight, compact hybrid system inside a compact body, while offering superior fuel economy and fun driving. Although registrations of the Honda Fit and new models FREED and Insight were strong, as a result of market headwind, overall unit sales dropped 9. 6% below the level of the previous fiscal year, to 556,000 units.

In production activities, Honda reduced output in response to the worldwide decline in unit sales and the need to make adjustments in inventories. As a consequence, automobile production during the fiscal year was down 11. 4%, to 1,148,000 units. In response to sudden changes in global markets, Honda transferred all production of the Stream model from the Suzuka Factory to the Saitama Factory. Also, production of the Fit for the North American market began at the Saitama Factory in addition to the Suzuka Factory. The start-up of production at the Yorii Factory, which was scheduled for 2010, has been postponed for two years or more. Also, plans for beginning the manufacturing of mini-vehicles at the Yokkaichi Factory of Yachiyo Industry Co. , Ltd. have been postponed for one year or more. *1: Source: JAMA Accord (Japan) Inspired by the key phrase “advanced quality,” the Accord offers everything in performance and function plus a major improvement in quality. Annual Report 2009 Odyssey (Japan) Offers a smoother ride even better than previous minivans with its low-slung styling 26 NORTH AMERICA In calendar 2008, total demand in the United States*1 declined 18% from the previous year, to about 13,190,000 units. As a result of the increase in gasoline prices in the first half of the year, a shift from light trucks such as large sports utility vehicles (SUVs) and pickup trucks to the fuel-efficient smaller car segment continued.

However, by the latter half of the year, sales of compact cars and light trucks had also dropped significantly. Especially from October, the market showed major contraction as a result of the effects of the financial crisis on the real economy, the deterioration in employment conditions, restraint in consumer spending, the adoption of more stringent credit criteria by financial institutions, and other factors. Under these circumstances, Honda aggressively introduced new models. In the Honda channel, the all-new Pilot was launched in May 2008, the all-new Fit in August, and the new Insight hybrid car in March 2009. Similarly, through its Acura channel, model introductions included the all-new TSX in April 2008, and the allnew TL in September.

Amid this business operating environment, Honda’s unit sales of its competitive lineup of compact cars expanded in the first half of the year as gasoline prices rose, while other automakers reported declining sales. In May 2008, the Honda Civic took the number one spot for new car sales among all models on the market. However, along with the deterioration in the real economy, sales began to fall in all segments, and, for the fiscal year, unit sales in North America as a whole declined 19. 1%, to 1,496,000 units. Although sales of the all-new TSX held firm, due to its attractive price, sales of higher-priced models such as light trucks, the Odyssey, the Pilot and the Acura MDX, as well as the Acura TL dropped substantially, reflecting decline in consumer sentiment and demand.

In the area of production, manufacturing of the Civic at the new automobile production plant in Indiana started in October 2008, but because of the sudden decline in demand, Honda had made production cutbacks at the major plants in North America. As a result, automobile production declined 13. 2% from the previous fiscal year, to 1,251,000 units. *1: Source: Ward’s Auto New factory in Indiana Insight (North America) TSX (North America) An entry-level Acura with sportier styling and easier handling Fit (North America) A subcompact passenger car with a sporty ride, reflecting close attention to design TL (North America) A luxury sedan offering a dynamic driving experience

Annual Report 2009 27 Review of Operations Automobile Business EUROPE During calendar 2008, demand in the principal markets of Spain, Italy, and the United Kingdom declined along with the unfavorable impact of the financial crisis from September 2008. As a consequence, total demand in Europe*1 fell approximately 8%, to about 14,710,000 units. On the other hand, total demand in Russia*2 increased approximately 13% from the previous year, to 2,930,000 units. Amid this business environment, although Honda introduced the all-new Accord in June and Jazz (sold as the Fit in Japan) in October 2008 into European markets, unit sales in this region were down 10. % from the previous year to 350,000 units mainly due to decreased total demands. In production activities, Honda of the U. K. Manufacturing Ltd. , a Honda U. K. subsidiary, made production adjustments in response to the sudden decline in automobile demand. As a result, production at Honda’s U. K. plant decreased 29. 4%, to 175,000 units compared to the same period of the previous fiscal year. *1: Source: Association des Constructeurs Europeens d’Automobiles (the European automobile association) (Passenger cars, figures include 27 EU countries and 3 European Free Trade Association (EFTA) countries. ) *2: Source: Association of European Businesses ASIA

In Asia, total demand in principal countries*1 in calendar 2008 increased over the previous year to about 15,100,000 units, despite the impact of the global financial crisis from September 2008 onward. Under this business operating environment, Honda introduced the all-new Fit in Taiwan in October 2008. Honda also introduced the all-new City, a small sedan in Thailand, in September 2008, and subsequently to India and other countries in Asia. The number of countries in Asia that are offering tax breaks to stimulate demand for fuel-efficient compact cars is increasing. In the compact car market, where continued growth is expected, Honda is introducing the City and the Jazz to follow the Civic, Accord, and CR-V, as consistent volume sales products.

During the fiscal 2009, total sales (comprising finished automobiles of Honda and its consolidated subsidiaries and unit sales of parts to Honda’s affiliated companies accounted for under the equity method) rose 5. 0% over the level of the previous fiscal year, to 793,000 units. Sales of the City and Jazz models held strong in Thailand, Indonesia, Malaysia, and elsewhere. Similarly, sales of the new Accord Accord (Europe) A sporty look combining superior driving stability with highlevel safety and environmental performance Jazz (Europe) Featuring top-class utility, high-level fuel economy, and monoform design 28 Annual Report 2009 through GuangqiHonda Automobile Co. , Ltd. an affiliate accounted for under the equity method), and sales of the CR-V through Dongfeng Honda Automobile Co. , Ltd. (an affiliate accounted for under the equity method) were also strong. In production, with an eye to future growth in the Asia/Oceania region, Honda began production at its second plant in Thailand in October 2008, which has an annual production capacity of 60,000 units. In India, in view of the drastic changes in the market environment, Honda announced that plans for the start-up of a new automobile plant have been postponed. *1: The total includes 11 countries: Thailand, Indonesia, Malaysia, the Philippines, Vietnam, Singapore, Taiwan, South Korea, India, Pakistan, and China Announcement event for the City in India

OTHER REGIONS Total demand in principal markets in the Other Regions increased, due mainly to economic expansion in the first half of the fiscal year, although conditions became stagnant in the latter half of the year as a result of the financial crisis from September 2008 onward. Total demand in Brazil*1 in calendar 2008 was approximately 2,670,000 units, approximately 14% higher than in the previous year. On the other hand, total demand in Australia*2 decreased 4% from the previous year, to approximately 1,010,000 units. Amid this business operating environment, Honda worked to strengthen its lineup of automobiles and increase sales in Brazil.

In addition to the existing Civic FFV model which is able to run on a flexible mixture of gasoline and ethanol fuel, Honda has expanded the flexible-fuel vehicle (FFV) version to the Fit model in November 2008. During fiscal 2009, even though unit sales in Australia, the Middle East, and certain other areas declined, Honda reported increases in unit sales in Brazil due mainly to favorable sales of the all-new Fit, supported by the implementation of a tax reduction on industrial products in Brazil and other developments. Similarly, Honda reported increased sales in the Argentine market. As a result, unit sales in Other Regions rose 2. 5%, to 322,000 units. 1: Source: ANFAVEA (Associacao Nacional dos Fabricantes de Veiculos Automotores (the Brazilian automobile association)(includes passenger vehicles and light commercial vehicles) *2: Source: Federal Chamber of Automotive Industries (the Australian automobile association) New automobile plant in Thailand City (Asia) Offers high value as a new benchmark for sub-compact sedans Fit FFV (Brazil) Popular in Brazil as a flexible-fuel vehicle (FFV), the Fit FFV leaps ahead of previous models in styling, fuel economy, and driving pleasure. Annual Report 2009 29 Thousands Years ended March 31 Review of Operations 12,000 8,000 4,000 0 Power Product and Other Businesses Thousands Years ended March 31 05 06 07 08 09 4,000 Thousands 3,000 Years ended March 31 Yen (billions) Years ended March 31 12,000 2,000 2,000

Cite this Honda Annual Report

Honda Annual Report. (2018, May 20). Retrieved from https://graduateway.com/honda-annual-report-essay/

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