Honda Motor Co. ( HMC ) plans to terminate 800 jobs at its South Marston plant near Swindon in southwest England due to sagging demand for its vehicles in Europe. The job cut would take place in the second quarter of the year.
The plant, which manufactures Civic, Jazz and CR-V models, has an annual production capacity of 250,000 cars. The company employs 3,500 people at the plant and produced 150,000 vehicles in 2012.
Many global automakers, including Ford Motor Co. ( F ) and General Motors Company ( GM ), and many European automakers such as PSA Peugeot ( PEUGY ) and Fiat SpA ( FIATY ) are resorting to job cuts and plant closures, as it became no longer feasible for them to undertake full-fledged operations in the continent. Honda is no exception. Demand for cars continues to slump in Europe's major markets, including France and Germany.
Last year, Honda added 500 workers and invested £267 million ($430 million) in the South Marston plant in anticipation of higher demand for its vehicles. However, sales in the continent, mainly Spain and Greece, fell by nearly a million, disappointing the company and prompting it to cut jobs.
Honda, a Zacks Rank #5 (Strong Sell) stock, reported a 36.1% rise in profits to ¥82.23 billion ($1.06 billion) or ¥45.63 (59 cents) per share in the second quarter of its fiscal 2013 ending Mar 31, 2013 from ¥60.43 billion or ¥33.53 per share in the year-ago quarter. However, earnings per share in the quarter lagged the Zacks Consensus Estimate by 33 cents.
Consolidated net sales and other operating revenues in the quarter appreciated 20.4% to ¥2.27 trillion ($29.27 billion) driven by higher revenues from the company's Automobile segment with the recovery from the impact of twin disaster in Japan in 2011, offset partially by unfavorable foreign currency translation effects.
Despite better results, Honda downgraded its revenue and earnings guidance for fiscal 2013 due to a negative impact from increased SG&A expenses and R&D expenses, and unfavorable currency translation effect.
The company has projected revenues to improve 23.3% ¥9.80 trillion, operating profits to rise 124.8% to ¥520 billion, net profit to go up 77.3% to ¥375 billion and earnings per share of ¥208.07 for the year. This compared with the prior outlook of a 29.6% increase in revenues to ¥10.30 trillion, 168% rise in operating profits to ¥620 billion, 122.2% increase in net profit to ¥470 billion and earnings per share of ¥260.78 for the year.