Honda 2007 Annual Report Download - page 61

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Japan
In Japan, unit sales rose 8.2%, to 527,000 units from the previ-
ous fiscal year. Sales of snowblowers, compact home-use
cogeneration systems*1, the GX-series engines supplied to
pump and generator manufacturers on an OEM*2 basis
applications increased.
North America
In North America, sales were strong for GCV series engines—
mainly for OEM use in lawn mowers, as well as GX- and GC-
series engines for such OEM applications as generators and
high-pressure washers. Sales of completed equipment
expanded, due to Honda’s introduction of the new HRR lawn
mower, but sales of generators declined as a result of overall
market shrinkage. As a result of these factors, unit sales from
power product grew 9.8% in fiscal year 2007, to 3,103,000
units.
During the year, Honda ranked highest in the electronic fuel-
injected (EFI) four-stroke outboard segment for a third con-
secutive year in the United States according to the customer
satisfaction study*3 conducted by J.D. Power and Associates.
Europe
In Europe, OEM sales of GCV-series engines for lawn mowers
were favorable, as were sales of GX-series engines for OEM
use in generators and construction equipment. As a result, unit
sales grew 10.0%, to 1,625,000 units.
Asia
Unit sales in Asia expanded 6.0%, to 760,000 units, due to
increased sales of pumps and other equipment in China and
India.
Other Regions
In other regions, increased unit sales of GX-series engines for
OEM production, mainly in South Africa, pushed up sales
10.3%, to 406,000 units from the previous fiscal year.
*1: Compact, home-use cogeneration system
Honda has combined its original electromagnetic inverter technologies
with the world’s smallest(i) natural gas engine (GE160V) in an efficient
layout to create a small, lightweight cogeneration unit. Due to its
compactness, the unit can be installed in the home and boasts an
overall energy efficiency of 85%. It also emits approximately 30% less
carbon dioxide than conventional natural gas-powered generators or
hot-water heating units using natural gas.(ii)
(i): A Honda development, the reciprocal gas engine
(ii): Data from Honda test results. Data compares electricity from the grid
with hot-water heating units that use natural gas.
*2: OEM (Original equipment manufacturing)
OEM refers to a manufacturing of products and components supplied
for sale under a third-party brand.
*3: Disclaimer: J.D. Power and Associates 2005–2007 U.S. Marine Engine
Competitive Information StudiesSM. 2007 Study is based on responses
from 12,140 U.S. owners who registered a new boat between June
2005 and May 2006. www.jdpower.com
In fiscal year 2007, Honda introduced two four-stroke outboard
engines, the BF90 and BF75 that underwent a full model
change, responding to needs throughout the world by simulta-
neously addressing demands for high levels of both environ-
mental performance, power performance and fuel efficiency.
Honda also began sales in Japan of the EU55is generator,
which employs electromagnetic inverter technology to supply a
high level of power, but emit a low level of noise, and of the
EU6500is generator in North America. In Japan, we introduced
a compact home-use cogeneration system with improved gen-
eration efficiency which underwent a full model change. We
also launched this model in the United States. In addition,
Honda launched the Punch X compact tiller in Japan, and the
F501 and FE500 compact tillers in Europe which underwent a
full model change. In China, we launched the new EM10000
high-output 10kVA generator, which is compact and equipped
with a newly developed alternator.
Financial Services Business
Honda offers a variety of financial services to its customers and
dealers, with the aim of supporting sales of Honda products.
These services are provided through finance subsidiaries in
Japan, the United States, Canada, the United Kingdom,
Germany, Brazil and Thailand.
In fiscal year 2007, net sales of our financial services busi-
ness, including intersegment sales within Honda, rose 32.9%,
to ¥413.3 billion from the previous fiscal year, due mainly to a
higher loan balance accompanying the expansion of automo-
bile business in North America, increased net sales in operating
leases, as well as positive currency translation effects. Operat-
ing income also expanded 27.6%, to ¥115.5 billion from the
previous fiscal year, due mainly to the increased profit attribut-
able to higher revenue benefiting from a higher loan balance
and positive currency translation effects, which offset the
negative impact of the increased interest rates. The operating
margin came to 28.0%.
Our finance subsidiaries in North America have historically
accounted for all leases as direct finance leases. However,
starting in the year ended March 31, 2007, some of the leases
which do not qualify for direct financing leases accounting
treatment are accounted for as operating leases. Generally,
direct financing lease revenues and interest income consist of
the recognition of finance lease revenue at inception of the
lease arrangement and subsequent recognition of the interest
income component of total lease payments using the effective
interest method. In comparison, operating lease revenues
include the recognition of the gross lease payment amounts on
a straight line basis over the term of the lease arrangement,
and operating lease vehicles are depreciated to their estimated
residual value on a straight line basis over the term of the lease.
It is not anticipated that the differences in accounting for oper-
ating leases and direct finance leases will have a material net
impact on the Company’s results of operations overall, how-
ever, operating lease revenues and associated depreciation of
leased assets do result in differing presentation and timing
compared to those of direct financing leases.
Finance Subsidiaries-Receivables, Net
Yen (millions)
Years ended March 31 2006 2007 % change
Non-current ¥3,139,591 ¥3,208,778 2.2%
Current 1,700,914 1,935,921 13.8
Total ¥4,840,505 ¥5,144,699 6.3%