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Year Ended March 31, 2008
Annual Report 2008
Honda Motor Co., Ltd.

Table of contents

  • Page 1
    Honda Motor Co., Ltd. Annual Report 2008 Year Ended March 31, 2008

  • Page 2
    ...of products, ranging from small general-purpose engines and scooters to specialty sports cars, to earn the Company an outstanding reputation from customers worldwide. *As of March 31, 2008 Reports Published by Honda CSR Report This report provides an overview of Honda's position on corporate social...

  • Page 3
    ... Power Product and Other Businesses Financial Services Business 34 Preparing for the Future 35 Risk Factors 37 Corporate Governance 44 Board of Directors, Corporate Auditors and Operating Officers Cover CBR600RR A super sport bike well-known for its light, high-performance engine...

  • Page 4
    ... 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...

  • Page 5
    Annual Report 2008 3

  • Page 6
    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) 2006 Net sales and other operating revenue Operating income Income before income taxes, minority interest and equity ...

  • Page 7
    ...320 (10.1) % Net Sales Breakdown Yen (millions) Motorcycle Business Automobile Business Financial Services Business Power Product and Other Businesses 2007 2008 Change 2007 2008 Change 2007 2008 Change 2007 2008 Change Japan North America Europe Asia Other Regions Total ¥ 101,753...

  • Page 8
    ...Financial Services Business 4.4% Yen (billions) Years ended March 31 Yen (billions) 500 400 300 200 300 240 180 120 60 0 Net Sales ¥533.5 billion (+30.2%) Operating Income ¥117.7 billion (+2.0%) 100 0 04 05 06 07 08 Net Sales (left scale) Operating Income (right scale) 6 Annual Report...

  • Page 9
    ...610 Asia Other Regions CG125FAN BIZ125 1,850 391 Europe Asia 755 615 Accord Japan 314 North America Other Regions Civic Fit 1,693 915 550 Europe Japan 2,415 Asia 484 North America Other Regions BF-50 HRG465 Location U.K. Germany Japan Thailand Canada U.S.A. Brazil Annual Report 2008...

  • Page 10
    ... express our gratitude to you, our shareholders, for your ongoing understanding and support. We would also like to thank the many people who have supported Honda's longterm growth, including our customers, business partners, and the societies around the world where we do business. 8 Annual Report...

  • Page 11
    ... South America, as a result of the expansion of sales in Brazil. In Asia, sales of scooters and other motorcycles in India increased, and sales in Vietnam were favorable, especially of automatic transmission models, supported by the fast-growing economy. In North America, however, as a result of...

  • Page 12
    ... outside the United States. Reviewing by region, in North America, overall unit sales of power products decreased as the housing market weakened. On the other hand, unit sales increased in Europe, mainly of general-purpose engines for OEM use, along with expansion in the Russian and Eastern European...

  • Page 13
    ... fuel efficiency in conventional gasoline engines, for the all-new Accord V6 models in North America that were launched in September 2007. Regarding hybrid cars, Honda's cumulative sales of hybrid models through the end of fiscal 2008 exceeded 250,000 units. Sales continue to be strong, as worldwide...

  • Page 14
    ... plant at Honda's Kumamoto Factory, which began operations in April 2008, will play a key role in strengthening motorcycle production. Honda created highly efficient production lines at this new plant to provide the capability to efficiently produce CBR1000RR Super Cub 50 12 Annual Report 2008

  • Page 15
    ... amount of energy used during production and as it works to create more people-friendly assembly lines. Also, in regions outside of Japan, in the latter half of fiscal 2008, we will begin production at a new automobile plant in Indiana, in the United States; a new automobile engine plant in Canada...

  • Page 16
    ... per share higher than in fiscal 2008. 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 has challenging objectives, works to realize the dreams of providing joy to Honda customers as well...

  • Page 17
    Review of Operations Motorcycle Business 16 Automobile Business 22 Power Product and Other Businesses 29 Financial Services Business 32 Annual Report 2008 15

  • Page 18
    ... Business h s a nds Unit Sales Thousands Years ended March 31 Net Sales 2007 2008 % change Yen (millions) Years ended March 31 2007 2008 % change Japan North America Europe Asia Other Regions Total 337 503 329 7,895 1,305 10,369 311 453 313 (7.7)% (9.9) (4.9) Japan North America Europe...

  • Page 19
    ...scal 2008 totaled 9,320,000 units*, a decrease of 10.1% from the previous fiscal year. Although unit sales increased in Other Regions including South America, sales of component parts sets to Honda affiliate companies accounted for under the equity method for their use in local production declined...

  • Page 20
    ... countries: the United Kingdom, Germany, the Netherlands, Belgium, France, Spain, Italy, Switzerland, Portugal and Austria. ** Naked sports models are not equipped with a cowl. *** Dual-purpose: motorcycles used mainly for off-road riding but also designed to run on paved roads (public roads...

  • Page 21
    ... for eight countries: Thailand, Indonesia, Malaysia, the Philippines, Vietnam, India, Pakistan and China ** Includes unit 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 method for use in...

  • Page 22
    ... units in Brazil in August 2007. In December 2007, annual production capacity in Brazil was expanded by 150,000 units, to 1.5 million units. Business Plans for Fiscal 2009 BIZ125 Honda has set a target of increasing sales of motorcycles in fiscal 2009, ending March 31, 2009, to 10,620,000 units...

  • Page 23
    ... the new Kumamoto Factory. Honda has incorporated the most advanced and efficient production technologies into this plant, and it will play the role of the leader plant for Honda's worldwide motorcycle production. New Kumamoto motorcycle plant Third plant of Hero Honda Big Red Annual Report 2008...

  • Page 24
    Automobile Business h s a nds Unit Sales Thousands Years ended March 31 Net Sales 2007 2008 % change Yen (millions) Years ended March 31 2007 2008 % change Japan North America Europe Asia Other Regions Total 672 1,788 324 620 248 3,652 615 1,850 (8.5)% 3.5 Japan North America Europe Asia...

  • Page 25
    ... mainly to the positive effects of higher revenue, cost reductions, price increases and currency effects. These positive factors offset such negative developments as higher sales incentives in North America, the sharp rise in raw material costs, higher SG&A expenses, changes in the model mix as well...

  • Page 26
    ... loan financing in that country. Amid this operating environment, during fiscal 2008, Honda's automobile sales increased 20.7%, to 391,000 units. Factors accounting for this performance were the expansion in sales of diesel-powered cars as well as favorable sales for the new model CR-V, which was...

  • Page 27
    ... sales of finished automobiles of Honda and its consolidated subsidiaries, and unit sales of parts to Honda's affiliate companies accounted for under the equity method for use in local production by such companies Cumulative production at the Thai plant reaches 1 million CR-V Annual Report 2008...

  • Page 28
    ...models showing strong sale performances, including the new Fit and the new Inspire, and will also implement measures to strengthen the product lineup and expand sales as we introduce new models, such as the Freed, in May 2008. In addition, in the Freed marketing and service field, Honda is working...

  • Page 29
    ... start-up date in fall 2008. In Europe, continued market growth is expected in Russia, the Ukraine and the countries of Central and Eastern Europe. Honda will work to expand sales of the CR-V and Civic, which are experiencing favorable sales performances, and introduce the new Accord with full model...

  • Page 30
    ... in Southeast Asia, Honda is scheduled to start production at a new plant in Thailand in the latter half of 2008. In fiscal 2009, Honda's target for unit sales in the Asian region as a whole is 920,000 units, an increase of 21.9%. In Other Regions, Honda is expecting further market expansion, as...

  • Page 31
    Power Product and Other Businesses h s a nds Unit Sales Thousands Years ended March 31 Net Sales 2007 2008 % change Yen (millions) Years ended March 31 2007 2008 % change Japan North America Europe Asia Other Regions Total 527 3,103 1,625 760 406 6,421 550 1,693 4.4 % 4.2 Japan North ...

  • Page 32
    ... engines and pumps in Indonesia and India as well as other factors. Other Regions GX 630 In Other Regions, unit sales for fiscal 2008 rose 19.2%, to 484,000 units, mainly as a result of increased sales of general-purpose engines in Brazil and higher sales of electric power generators in Australia...

  • Page 33
    ... to sell about the same number of engines for OEM use in construction equipment as in the previous fiscal year. Also, for core products such as lawn mowers and products such as generators that are recording strong sales, Honda will work to increase sales by expanding its marketing network and...

  • Page 34
    Financial Services Business Y e n ns Net Sales Yen (millions) Years ended March 31 Finance Subsidiaries-Receivables, Net 2007 2008 % change Yen (millions) Years ended March 31 2007 2008 % change Japan North America Europe Asia Other Regions Total ¥ 21,497 364,892 12,642 3,150 7,520 ¥409,...

  • Page 35
    ... of Operations Financial Services Business To support the sale of its products, Honda provides financial services to its customers (including retail lending and leasing) and wholesale financing to its dealers through financial services subsidiaries in Japan, the United States, Canada, the United...

  • Page 36
    ...products. 3. Sales Efficiency Honda will remain proactive in its efforts to expand product lines through the innovative use of IT and to upgrade the sales and service structure, in order to further satisfy its customers. 4. Product Quality Responding to increasing customer demand, Honda will upgrade...

  • Page 37
    ...of products sold and materials purchased. Accordingly, currency fluctuations have an effect on Honda's results of operations and financial condition, as well as Honda's competitiveness, which will over time affect its results. Since Honda exports many products and components from Japan and generates...

  • Page 38
    ... financial services business conducts business under highly competitive conditions in an industry with inherent risks Honda's financial services business offers various financing plans designed to increase the opportunity for sales of its products and to generate financing income. However, customers...

  • Page 39
    ...& CEO 9 directors Regional Operations (Europe, the Middle & Near East and Africa) Honda Driving Safety Promotion Center Corporate Planning Division Corporate Communications Division New Business Development and Planning Office Aero Engine Business Office Aircraft Operation Office Motorcycle Quality...

  • Page 40
    ... are related to business execution or that are designated by law and supervises business execution. In fiscal 2008, the Board of Directors met seven times. Matters and Requirements for Resolution by the Company's General Meetings of Shareholders The Articles of Incorporation of the Company currently...

  • Page 41
    ... with explanations and reports on accounting audit plans and results, and opinions were exchanged. The corporate auditors coordinate closely with the Audit Office, which is responsible for internal audits, with respect to audit policies and schedules. In fiscal 2008, corporate auditors and the...

  • Page 42
    ...of creating products that are distinctive and internationally competitive. Business Execution Officer System The Company has assigned a general manager from the Board of Directors or an operating officer to each regional, business, and functional division, as well as to each research and development...

  • Page 43
    ... investors to explain the Honda Group's future business strategies. Representatives based in North America and Europe also hold information meetings for institutional investors as appropriate. In addition, the Company holds information meetings for investors at motor shows and other major events...

  • Page 44
    ... Proposal Line and submits status reports to the Board of Corporate Auditors. Business Audits The Audit Office is an independent supervisory department under the direct control of the president. This office audits the performance of each department and works to improve the internal auditing...

  • Page 45
    ... three corporate auditors. Currently, Honda has five corporate auditors. Each corporate auditor has a four-year term. In contrast, the term of each director of Honda is one year. With respect to the requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934 relating to listed company...

  • Page 46
    ... Managing Director Senior Managing Director Takeo Fukui Senior Managing Director Koichi Kondo Senior Managing Director Senior Managing Director Senior Managing Director Tetsuo Iwamura Masaaki Kato Mikio Yoshimi Atsuyoshi Hyogo Takanobu Ito Shigeru Takagi Akio Hamada 44 Annual Report 2008

  • Page 47
    ... Near East and Africa) President and Director of Honda Motor Europe Ltd. Chief Operating Officer for Production Operations Risk Management Officer General Supervisor, Information Systems Senior Managing Director Tetsuo Iwamura Chief Operating Officer for Regional Operations (North America) President...

  • Page 48
    ... Motor Europe Ltd. President and Director of Honda of the U.K. Manufacturing Ltd. Corporate Communications, Motor Sports General Manager of Suzuka Factory of Production Operations President and Director of Honda Canada Inc. Deputy Chief Operating Officer for Regional Sales Operations (Japan) General...

  • Page 49
    ... Not Reviewed) Consolidated Balance Sheets Divided into Non-Financial Services Businesses and Finance Subsidiaries (Unaudited) Consolidated Statements of Cash Flows Divided into Non-Financial Services Businesses and Finance Subsidiaries (Unaudited) Financial Summary 113 114 Annual Report 2008 47

  • Page 50
    ... subsidiaries in North America, Europe and Other Regions. (3) With respect to "changes in net sales and model mix", management has analyzed changes in sales volume and in the mix of product models sold in major markets which have resulted in increases/decreases in profit, as well as certain...

  • Page 51
    ... impacts of increased sales incentives in North America, substantially increased raw material costs, increased SG&A expenses, changes in the model mix, higher R&D expenses, and increased depreciation expenses. Power Product and Other Businesses Honda's unit sales of power products totaled 6,057,000...

  • Page 52
    .... Financial Services Business To support the sale of its products, Honda provides wholesale financing to dealers and retail lending and leasing to customers through our finance subsidiaries in Japan, the United States, Canada, the United Kingdom, Germany, Brazil and Thailand. As a result of...

  • Page 53
    ..., we implemented a full model change for the INSPIRE in Japan and for the Accord in North America, Asia and Other Regions. The new versions boast high-level safety features and are equipped with Honda's newly developed 3.5-liter i-VTEC V6 engine with the new Variable Cylinder Management (VCM) System...

  • Page 54
    ...the motorcycle business, we made capital expenditures of ¥86,687 million in the fiscal year ended March 31, 2008. Funds were allocated to the introduction of new models, as well as the improvement, streamlining and modernization of production facilities, and improvement of Sales and R&D facilities...

  • Page 55
    ... in North America, Honda Transmission Mfg. of America, Inc. completed construction of its facilities for the production of high precision gears in July 2007. In the financial services business segment, capital expenditures excluding property on operating leases amounted to ¥627 million in...

  • Page 56
    ... and a sound balance sheet. Honda's main business is the manufacturing and sale of motorcycles, automobiles and power products. To support this business, it also provides retail financing and automobile leasing services for customers, as well as wholesale financing services for dealers. In its...

  • Page 57
    ... tax benefits, including those related to this examination. At March 31, 2008, we had no material capital lease obligations or long-term liabilities reï¬,ected on our balance sheet under U.S. GAAP other than those set forth in the table above. Application of Critical Accounting Policies...

  • Page 58
    ...subsidiaries provide wholesale financing to dealers and retail lending and leasing to customers mainly in order to support sales of our products, principally in North America. We classify retail and direct financing lease receivables derived from those services as finance subsidiaries-receivables...

  • Page 59
    ... affect our pension costs and obligations, including our cash requirements to fund such obligations. The following table shows the effect of a 0.5% change in the assumed discount rate and the expected long term rate of return on our funded status, equity, and pension expense. Annual Report 2008 57

  • Page 60
    ... in the normal course of business in order to manage risks associated with changes in foreign currency exchange rates and in interest rates. Honda does not hold any derivative financial instruments for trading purposes. 2008 Average contractual rate (Yen) Yen (millions) Contract amounts Fair value...

  • Page 61
    ... : The finance subsidiaries-receivables include finance subsidiaries-receivables included in trade receivables and other assets in the consolidated balance sheets. Additional detailed information is described in Note 4 to the accompanying consolidated financial statements. Annual Report 2008 59

  • Page 62
    ...trading, and are reported at fair value, with unrealized gains or losses, net of deferred taxes included in accumulated other comprehensive income (loss) in the stockholders' equity section of the consolidated balance sheets. At March 31, 2007 and 2008, the estimated fair value of marketable equity...

  • Page 63
    ... litigation incidental to our business. With respect to product liability, personal injury claims or lawsuits, we believe that any judgment that may be recovered by any plaintiff for general and special damages and court costs will be adequately covered by our insurance and accrued liabilities...

  • Page 64
    ... Balance Sheets Honda Motor Co., Ltd. and Subsidiaries March 31, 2007 and 2008 U.S. dollars (millions) (note 2) Yen (millions) Assets Current assets: Cash and cash equivalents Trade accounts and notes receivable, net of allowance for doubtful accounts of ¥8,199 million in 2007 and ¥8,181 million...

  • Page 65
    Yen (millions) U.S. dollars (millions) (note 2) Liabilities, Minority Interests and Stockholders' Equity Current liabilities: Short-term debt (note 9) Current portion of long-term debt (note 9) Trade payables: Notes Accounts Accrued expenses (note 13) Income taxes payable (note 11) Other current ...

  • Page 66
    ... Honda Motor Co., Ltd. and Subsidiaries Years ended March 31, 2006, 2007 and 2008 2006 Yen (millions) U.S. dollars (millions) (note 2) 2007 2008 2008 Net sales and other operating revenue (note 4) Operating costs and expenses: Cost of sales (note 4) Selling, general and administrative Research...

  • Page 67
    Consolidated Statements of Stockholders' Equity and Comprehensive Income Honda Motor Co., Ltd. and Subsidiaries Years ended March 31, 2006, 2007 and 2008 Common stock Capital surplus Legal reserves Yen (millions) Accumulated other comprehensive income (loss), net Total stockholders' equity ...

  • Page 68
    Consolidated Statements of Stockholders' Equity and Comprehensive Income Yen (millions) Accumulated other comprehensive income (loss), net Common stock Capital surplus Legal reserves Retained earnings Treasury stock Total stockholders' equity Balance at March 31, 2007 Transfer to legal ...

  • Page 69
    ... of property, plant and equipment Acquisitions of finance subsidiaries-receivables Collections of finance subsidiaries-receivables Proceeds from sales of finance subsidiaries-receivables Purchases of operating lease assets Proceeds from sales of operating lease assets Net cash used in investing...

  • Page 70
    ... at the time the product is sold to the dealer. Operating lease revenues are recorded on a straight-line basis over the term of the lease. Interest income from finance receivables is recognized using the interest method. Finance receivable origination fees and certain direct origination costs are...

  • Page 71
    ... Property on operating leases is reported at cost, less accumulated depreciation. Depreciation of the vehicles is generally provided on a straight-line basis to an estimated residual value over the lease term. The residual values of the vehicles related to the operating leases are estimated by using...

  • Page 72
    ... expected level of future warranty costs as well as current information on repair costs. Included in warranty expenses accruals are costs for general warranties on vehicles Honda sells and product recalls. (o) Basic Net Income per Common Share Basic net income per common share has been computed by...

  • Page 73
    ... current rates on the balance sheet date. All revenues and expenses associated with foreign currencies are converted at the rates of exchange prevailing when such transactions occur. The resulting exchange gains or losses are reï¬,ected in other income (expense) in the consolidated statements...

  • Page 74
    ...impact on the Company's consolidated financial position or results of operations. In February 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - including an...

  • Page 75
    ... of tax effect of ¥31,235 million, and ¥18,149 million, respectively, for the items described below: 1. The Company and its certain domestic subsidiaries in Japan historically calculated depreciation of property, plant and equipment, using a salvage value determined as 5% of the acquisition cost...

  • Page 76
    ... generated by finance subsidiaries. Certain finance receivables related to sales of inventory are included in trade receivables and other assets in the consolidated balance sheets. Finance receivables include wholesale financing to dealers and retail financing and direct financing leases...

  • Page 77
    ...and cost of sales include finance income and related cost of finance subsidiaries for each of the years in the three-year period ended March 31, 2008 as follows: Yen (millions) U.S. dollars (millions) (note 2) 2006 2007 2008 2008 Finance income Finance cost Finance subsidiaries of the Company...

  • Page 78
    ... equity in net assets is not material as of March 31, 2007 and 2008. Investments in affiliates include equity securities which have quoted market values at March 31, 2007 and 2008 compared with related carrying amounts as follows: Yen (millions) U.S. dollars (millions) (note 2) 2007* 2008 2008...

  • Page 79
    ... period ended March 31, 2008. Honda mainly purchases materials, supplies and services from affiliates, and sells parts used in its products, equipment and services to affiliates. Yen (millions) U.S. dollars (millions) (note 2) 2007 2008 2008 Trade receivables from Trade payables to ¥ 77,317...

  • Page 80
    ... in other current assets. U.S. dollars (millions) (note 2) ¥ - 641 - 1,913 $- 6 - 19 $25 ¥ 2,554 Yen (millions) 2007 2008 2008 Noncurrent Auction rate securities (non-marketable) Marketable equity securities Government bonds U.S. government and agency debt securities Non-marketable equity...

  • Page 81
    ... losses on marketable securities and fair value of the related securities, aggregated by length of time that individual securities have been in a continuous unrealized loss position at March 31, 2008 were as follows: Yen (millions) Fair value Unrealized losses U.S. dollars (millions) (note 2) Fair...

  • Page 82
    ...16,839 The weighted average interest rates on short-term debt outstanding at March 31, 2007 and 2008 were 4.00% and 4.36%, respectively. Long-term debt at March 31, 2007 and 2008 is as follows: Yen (millions) U.S. dollars (millions) (note 2) 2007 2008 2008 Honda Motor Co., Ltd.: Loans, maturing...

  • Page 83
    ...interest rate exposures resulting from the issuance of long-term debt. Fair value of contracts related to currency swaps and interest rate swaps is included in other assets and other current assets and/or liabilities in the consolidated balance sheets, as appropriate (see note 16). Unless a right of...

  • Page 84
    ...2008 consist of the following: Yen (millions) U.S. dollars (millions) (note 2) 2007 Accrued liabilities for product warranty, excluding current portion Pension and other postretirement benefits (note 13) Deferred income taxes...(40,981) ¥ (2,756) ¥ 141,922 175,267 ¥ 317,189 82 Annual Report 2008

  • Page 85
    ... the deferred tax assets and deferred tax liabilities at March 31, 2007 and 2008 are presented below: Yen (millions) U.S. dollars (millions) (note 2) 2007 2008 2008 Deferred tax assets: Inventories Allowance for dealers and customers Accrued bonus Property, plant and equipment Foreign tax credit...

  • Page 86
    ...2007 and 2008 are reï¬,ected in the consolidated balance sheets under the following captions: Yen (millions) U.S. dollars (millions) (note 2) 2007* 2008 2008 Current assets-Deferred income taxes Other assets Other current liabilities Other liabilities Net deferred tax (liability) asset *See note...

  • Page 87
    ... (millions) U.S. dollars (millions) (note 2) Balance at beginning of year Additions for tax positions related to the current year Additions for tax positions of prior years Reductions for tax positions of prior years Settlements Reductions for statute of limitations Effect of exchange rate changes...

  • Page 88
    ..., "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R)" on March 31, 2007, recognized its overfunded or underfunded status as an asset or liability in its consolidated balance sheets. 86 Annual Report 2008

  • Page 89
    ... Yen (millions) Japanese plans Foreign plans 2007 2008 2007 2008 Change in benefit obligations: Benefit obligations at beginning of year Service cost Interest cost Plan participants' contributions Actuarial gain (loss) Benefits paid Amendment Business combination Foreign exchange translation...

  • Page 90
    ...: U.S. dollars (millions) (note 2) Japanese plans Foreign plans 2008 2008 Change in benefit obligations: Benefit obligations at beginning of year Service cost Interest cost Plan participants' contributions Actuarial gain (loss) Benefits paid Amendment Business combination Foreign exchange...

  • Page 91
    Amounts recognized in the consolidated balance sheets consist of: U.S. dollars (millions) (note 2) Japanese plans Foreign plans 2008 2008 Noncurrent assets Current liabilities Noncurrent liabilities Total Amounts recognized in accumulated other comprehensive income consist of: $ 16 (55) (5,115)...

  • Page 92
    ... ended March 31, 2008 included the following: Yen (millions) U.S. dollars (millions) (note 2) 2006 2007 2008 2008 Japanese plans: Pension Cost Service cost-benefits earned during the year Interest cost on projected benefit obligations Expected return on plan assets Amortization of actuarial...

  • Page 93
    ... participants under accepted risks. Honda sets target assets allocations for the individual asset categories based on the estimated returns and risks in the long future. Plan assets are invested in individual equity and debt securities using the target assets allocation. Annual Report 2008 91

  • Page 94
    ...¥66,221 million, as a result of the resolution of board of directors. During the year ended March 31, 2007, the Company reissued certain of its treasury stock at fair value of ¥18,521 million to the outside shareholder of affiliates to obtain 100% share of these companies. 92 Annual Report 2008

  • Page 95
    ... Income (Loss) The components and related changes in accumulated other comprehensive income (loss) for each of the years in the threeyear period ended March 31, 2008 are as follows: Yen (millions) U.S. dollars (millions) (note 2) 2006 2007 2008 2008 Adjustments from foreign currency translation...

  • Page 96
    ...(millions) Before-tax amount Tax (expense) or benefit (note 11) Net-of-tax amount 2006: Adjustments from foreign currency translation Unrealized gains (losses) on marketable securities: Unrealized holding gains... 16,801 (26,386) (73) (26,459) ¥(370,075) ¥ 57,808 ¥(312,267) 94 Annual Report 2008

  • Page 97
    ... of finance subsidiaries-receivables at March 31, 2007 and 2008 in the table also include ¥678,649 million and ¥652,749 million ($6,515 million) of finance receivables classified as trade receivables and other assets in the consolidated balance sheets, respectively. Annual Report 2008 95

  • Page 98
    ... forward exchange contracts, foreign currency option contracts and foreign currency swap agreements are included in other assets and other current assets and/or liabilities in the consolidated balance sheets as follows (see note 9): Yen (millions) U.S. dollars (millions) (note 2) 2007 2008 2008...

  • Page 99
    .... Risk Management Activities and Derivative Financial Instruments Honda is a party to derivative financial instruments in the normal course of business to reduce their exposure to ï¬,uctuations in foreign exchange rates and interest rates. Currency swap agreements are used to convert long-term debt...

  • Page 100
    ... of time. Product warranties vary depending upon the nature of the product, the geographic location of its sale and other factors. The changes in provisions for those product warranties for each of the years in the two-year period ended March 31, 2008 are as follows: Yen (millions) U.S. dollars...

  • Page 101
    ... 31, 2006, 2007 and 2008 are set forth in the following table: Yen (millions) Additions Balance at beginning of period Charged to costs and expenses Deductions Bad debts written off Foreign currency translation Balance at end of period March 31, 2006: Trade accounts and notes receivable Allowance...

  • Page 102
    ... parts Financial services business Power product and other businesses Financial, insurance services Power products and relevant parts, and others Retail loan and lease related to Honda products Others Research & Development Manufacturing Sales and related services Others 100 Annual Report 2008

  • Page 103
    ... March 31, 2006 Yen (millions) Motorcycle Business Automobile Business Financial Services Business Power Product and Other Businesses Segment Total Reconciling Items Consolidated Net sales and other operating revenue: External customers Intersegment Total Cost of sales, SG&A and R&D expenses Gain...

  • Page 104
    ... March 31, 2008 U.S. dollars (millions) (note 2) Motorcycle Business Automobile Business Financial Services Business Power Product and Other Businesses Segment Total Reconciling Items Consolidated Net sales and other operating revenue: External customers Intersegment Total Cost of sales, SG&A and...

  • Page 105
    ... Revenue by Product or Service Groups Yen (millions) U.S. dollars (millions) (note 2) Years ended March 31: 2006 2007 2008 2008 Motorcycles and relevant parts All-terrain vehicles (ATVs), personal watercraft and relevant parts Automobiles and relevant parts Financial, insurance services Power...

  • Page 106
    ... by Financial Instruments and Exchange Law: (1) Overseas sales and revenues based on the location of the customer Yen (millions) U.S dollars (millions) (note 2) Years ended March 31: 2006 2007 2008 2008 North America Europe Asia Other regions Explanatory notes: Major countries or regions in...

  • Page 107
    ...261,907) 10,235,261 As of and for the year ended March 31, 2008 Yen (millions) Japan North America Europe Asia Other Regions Total Reconciling Items Consolidated Net sales and other operating revenue: External customers Transfers between geographic areas Total 2,835,639 4,889,040 173,751 6,265,263...

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    As of and for the year ended March 31, 2008 U.S dollars (millions) (note 2) Japan North America Europe Asia Other Regions Total Reconciling Items Consolidated Net sales and other operating revenue: External customers Transfers between geographic areas Total 28,303 48,798 1,734 62,534 918 15,912 3,...

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    Annual Report 2008 107

  • Page 110
    ... in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. Because...

  • Page 111
    ...Honda's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform...

  • Page 112
    ..., in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Honda Motor Co., Ltd. and subsidiaries as of March 31, 2007 and 2008, and the related consolidated statements of income, stockholders' equity and comprehensive...

  • Page 113
    ... Reviewed) Yen (millions except per share amounts) Year ended March 31, 2007 Year ended March 31, 2008 I Net sales and other operating revenue Operating income Income before income taxes Net income Basic net income per American depositary share Tokyo Stock Exchange: (TSE) (in yen) High Low New York...

  • Page 114
    Consolidated Balance Sheets Divided into Non-Financial Services Businesses and Finance Subsidiaries (Unaudited) Yen (millions) At March 31, 2007 and 2008 2007 2008 Assets Non-financial services businesses Current assets: Cash and cash equivalents Trade accounts and notes receivable, net ...

  • Page 115
    ... (increase) in investments and advances Capital expenditures Proceeds from sales of property, plant and equipment Decrease (increase) in finance subsidiaries-receivables Purchase of operating lease assets Proceeds from sales of operating lease assets Net cash used in investing activities 93,311...

  • Page 116
    ... 100% 100% 100% 100% Unit sales: Motorcycles Automobiles Power Products Number of employees Exchange rate (yen amounts per U.S. dollar) Rates for the period-end Average rates for the period *The geographic breakdown of sales amounts is based on the location of customers. 5,257 2,343 2,857 109,400...

  • Page 117
    Yen (millions) U.S. dollars (millions) 2002 2003 2004 2005 2006 2007 2008 2008 ¥7,362,438 661,202 555,854 231,150 (4,512) 42,515 362,707 4.9% 24,360 395,176...925 6,057 178,960 ¥ 133 125 ¥ 120 122 ¥ 106 113 ¥ 107 108 ¥ 117 113 ¥ 118 117 ¥ 100 114 Annual Report 2008 115

  • Page 118
    ... to be classified in other liabilities and other assets. The long-term portion of related deferred tax liabilities, which were included in other current liabilities, and deferred income taxes have also been revised to be classified in other liabilities and other assets. 116 Annual Report 2008

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    Corporate Information 118 120 122 124 Principal Manufacturing Facilities Honda Group Honda's History Investor Information Annual Report 2008 117

  • Page 120
    ... Manufacturing Facilities Location Start of Operations Motorcycles Number of Employees Principal Products Manufactured Engines Transmissions Automobiles Power products All-terrain vehicles U.K. Swindon, Wiltshire 1992 4,924 France Ormes 1986 159 Italy Atessa 1976 798 India Greater Noida...

  • Page 121
    ... U.S.A. Swepsonville, North Carolina 1984 573 U.S.A. Timmonsville, South Carolina 1998 1,484 U.S.A. Lincoln, Alabama 2001 4,513 Mexico El Salto 1995 1,913 U.S.A. Tallapoosa, Georgia 2006 Brazil Manaus 1976 7,654 Brazil Sumare 1997 2,956 Argentina Buenos Aires 2006 211 Annual Report 2008 119

  • Page 122
    ... Group Company Name Established Lines of Business Head Office Honda Motor Co., Ltd. September 24, 1948 Motorcycles, Automobiles, Financial Services and Power Products and Others 1-1, 2-chome, Minami-Aoyama, Minato-ku, Tokyo, Japan Principal Subsidiaries Region Country of Incorporation Company...

  • Page 123
    ...Accounted for under the Equity Method Region Country of Incorporation Company Percentage Ownership and Voting Interest Main Lines of Business Motorcycle Business Automobile Business Financial Services Business Power Product & Other Businesses Function Manufacturing Manufacturing Manufacturing Japan...

  • Page 124
    ...type bicycle engine, produced Honda Motor Co., Ltd. incorporated (capital: ¥1 million, employees: 34) Dream D-type, Honda's first motorcycle, produced H-type engine, Honda's first power product, produced Listed on the Tokyo Stock Exchange Super Cub motorcycle released American Honda Motor Co., Inc...

  • Page 125
    ...at new motorcycle plant Three dealer channels integrated into one Honda brand Cumulative production of power products reaches 70 million units Honda establishes subsidiary in Ukraine Implementation of two-for-one stock split for common shares Common stock-to-ADR exchange ratio changed from 0.5 share...

  • Page 126
    ... Information Honda Motor Co., Ltd. Company Information Established Lines of Business Fiscal Year-end Independent Registered Public Accounting Firm Web Site฀ ฀ September 24, 1948 Motorcycles, Automobiles, Financial Services and Power Products and Others March 31 KPMG AZSA & Co. •฀Corporate...

  • Page 127
    ... Individuals 9.9% Government and municipal corporations 0.0% Domestic companies and others 10.1% Financial institutions 41.6% Securities companies 1.9% Honda's Stock Price and Trading Volume on the Tokyo Stock Exchange Yen Stock (millions) Share prices prior to stock split have been adjusted to...

  • Page 128
    This annual report is printed on recycled paper using soy ink with no volatile organic content. Furthermore, a waterless printing process was used to prevent toxic emissions. Printed in Japan