November 21, 2008 / 9:05 AM / 10 years ago

WRAPUP 2-Honda cuts more production, Nissan ratings lowered

* Honda reduces production in three continents

* Fitch cuts Nissan ratings, outlook negative

* Honda shares up 2.3 pct, Nissan up 6.1 pct before news (Adds Moody’s outlook change on Nissan, other details)

By Chang-Ran Kim, Asia autos correspondent

TOKYO, Nov 21 (Reuters) - Honda Motor Co (7267.T) said it would build fewer cars in Japan, Europe and North America to reflect an increasingly bleak outlook for sales as the global economic crisis discourages big-ticket purchases.

The severe and deepening downturn in demand is threatening the future of Detroit’s Big Three — General Motors (GM.N), Ford Motor (F.N) and Chrysler LLC [CBS.UL] — who are now seeking government support. [ID:nN20421931]

But no automakers have been spared and Asian rivals have been rushing to cut costs and avoid inventories building further.

On Friday, Fitch Ratings downgraded the long-term debt ratings of Nissan Motor Co (7201.T) to BBB-plus from A-minus, assigning a negative outlook citing its dependence on the flagging U.S. market. [ID:nWNA0016]

Honda, Japan’s No.2 automaker, said it would cut output at its Saitama factory near Tokyo by 40,000 vehicles due to slow sales of Accord sedans, mainly bound for North America and Europe.

It will also chop production by an additional 21,000 cars at its UK factory, bringing the total reduction there to 53,000 units in the year to March 2009, or more than 20 percent of annual capacity.

The latest move follows Honda’s announcement that it would cut another 18,000 cars in the United States, and brings the output reduction to 150,000 cars globally for 2008/09. [ID:nN20414430]

At the start of the business year in April, Honda had planned to sell 4.14 million cars. It does not provide a production forecast.

Over the last two days, domestic rival Toyota Motor Corp (7203.T) flagged output reductions in both North America and Thailand, and Nissan has plans to reduce output by at least 250,000 vehicles. [ID:nBKK417684] [ID:nT338414] [ID:nT261951]

In the United States, the auto industry is grappling with alarming inventory levels worth 98 days of supply at the end of October.


Fitch’s rating cut for Nissan was its first since Standard & Poor’s reduction in early 2000.

“The extraordinarily rapid appreciation of the yen, together with (Nissan’s) historically smaller focus on compact cars compared to its Japanese peers, combine to increase the difficulties for Nissan,” Fitch Director Tatsuya Mizuno said.

Fitch lowered its rating on Nissan’s French partner, Renault SA (RENA.PA), to BBB from BBB-plus a day earlier, while Moody’s on Friday changed the ratings outlooks on Nissan’s A3 long-term ratings to stable from positive. [ID:nWNA9898] [ID:nWNA0011]

S&P had changed its outlook on Nissan’s long-term debt rating of BBB+ to negative from stable earlier this month. [ID:nWNA8628]

Honda, with its car-heavy line-up including the Civic, Accord and Jazz/Fit, had been largely immune to a downturn in the U.S. market that had mainly hit the light trucks segment of fuel-guzzling vehicles.

But economic woes have attacked the broader market in recent weeks, pushing down U.S. sales of the Accord. In Europe, Honda has been hit hard as demand dried up for bigger diesel cars — until recently a strong driver for local sales.

With the latest cuts, Honda’s Swindon factory will be closed for a total of 50 days between December and the end of the business year, shutting down for the entire months of February and March.

Honda said it would discuss with the union what to do with the workforce during the stoppage.

A spokeswoman declined to comment on the likely impact on Honda’s annual profits, which were revised down by 12 percent at the end of last month. [ID:nT151521]

“We will provide any updates in January along with third-quarter results,” she said. (Editing by Lincoln Feast)

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