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Honda Motor Co., Ltd.
Year Ended March 31, 2010
Honda Motor Co., Ltd.
Annual Report 2010
Annual Report 2010

Table of contents

  • Page 1
    Annual Report 2010 Honda Motor Co., Ltd. Year Ended March 31, 2010

  • Page 2
    ... 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...

  • Page 3
    ... largest motorcycle manufacturer and one of the leading automakers. With a global network of 390* subsidiaries and 102* affiliates accounted for under the equity method, Honda develops, manufactures and markets a wide variety of products, to earn the Company an outstanding reputation from customers...

  • 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
    ... (right scale) Unit Sales by Region (Thousands) Years ended March 31 2008 2009 2010 Motorcycle Business Yen (billions) 1,600 1,200 800 400 Yen (billions) 160 120 80 1,433 40 0 190 189 199 7,628 13.3% Automobile Business 0 06 07 08 09 10 Japan North Europe America Asia Other Regions Yen...

  • Page 6
    ... Research and development Total assets Total Honda Motor Co., Ltd. shareholders' equity Capital expenditures (excluding purchase of operating lease assets) Depreciation (excluding property on operating leases) Per share data Net income attributable to Honda Motor Co., Ltd. Dividends paid Total Honda...

  • Page 7
    ...Net Sales Breakdown Yen (millions) Motorcycle Business Automobile Business Financial Services Business Power Product and Other Businesses 2009 ¥ 81,822 ¥ 182,284 178,621 460,412 508,372 2010 Change 2009 2010 Change 2009 2010 Change 2009 2010 Change Japan North America Europe Asia...

  • Page 8
    .... In Japan, the economy showed a trend toward improvement, especially in consumer spending, although conditions continued to be tough, with unemployment rates remaining high and other factors. Under these business conditions, Honda's consolidated net sales and other operating revenue (the "Revenue...

  • Page 9
    ... of agriculturalsupport policies adopted by some countries and the effects of weather conditions. On the other hand, in Japan, North America and Europe, unit sales of engines for OEM use declined, while in Other Regions, including South America, sales of pumps and general-purpose engines decreased...

  • Page 10
    ... of medium and large-sized hybrid automobiles. In the motorcycle business, in December of this year, we are planning to begin lease sales of the EV-neo electric scooter for business use in Japan. Since this new scooter is powered by an electric motor, it emits no CO2 emissions at all and thus...

  • Page 11
    ... of customers in such markets as India, and, to offer it at a more attractive price, Honda is taking a broad range of initiatives, including intensifying local procurement capabilities. Honda has amassed tremendous know-how in the development, parts procurement and production of two-wheeled vehicles...

  • Page 12
    ... of New Production Systems Honda, thus far, has adopted a policy of manufacturing its products close to the customer, and, especially in the case of automobiles, it has structured a ï¬,exible manufacturing system centered on Japan that enables it to react to changes in demand in countries around...

  • Page 13
    ...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 2010...

  • Page 14
    Review of Operations Motorcycle Business Percentage of Net Sales by Business Unit Sales Thousands 12,000 Years ended March 31 Net Sales Yen (billions) 2,000 1,500 Years ended March 31 13.3 8,000 % 4,000 1,000 500 0 0 06 07 08 Japan 09 10 North America Europe Asia 06 07 08 09 10 ...

  • Page 15
    ... South America, and North America although sales in Asia outside Japan increased. Revenue decreased ¥271.2 billion, or 19.2%, to ¥1,140.2 billion, due mainly to the decline in unit sales and unfavorable foreign currency translation effects. Honda estimates that, had the exchange rate remained...

  • Page 16
    ...motorcycle parking spaces in city areas. Amid these difficult operating conditions, in June 2009, Honda strengthened its lineup by launching its Super Cub 110 business model, which is both economic and practically useful. Also, in March 2010, Honda launched its CB1100 Type I large sport bike adding...

  • Page 17
    ... other models had a positive effect; nevertheless, the number of large scooters and other products declined. As a consequence, total unit sales in Europe decreased 27.9% from the previous fiscal year, to 199,000 units. * According to Honda research. The motorcycle market includes 10 countries: the...

  • Page 18
    ... favorable expansion in sales of new models and growth in sales, principally in India, Vietnam, and certain other countries. In production activities, in India, consolidated subsidiary Honda Motorcycle & Scooter India Private Limited made the decision to build a second production plant to respond to...

  • Page 19
    ... these conditions, in Brazil, Honda introduced an upgraded version of its CB300R in June 2009, offering advanced design and enhanced riding performance. Also, in November, Honda launched its NXR 150 BROS MIX, which is equipped with the Mix Fuel Injection System that makes it possible to use various...

  • Page 20
    Review of Operations Automobile Business Percentage of Net Sales by Business Unit Sales Thousands 4,000 3,000 Years ended March 31 1,000 750 500 250 0 Net Sales Yen (billions) 10,000 7,500 5,000 2,500 0 Years ended March 31 76.4 % 2,000 1,000 0 06 07 08 Japan 09 10 North America Europe ...

  • Page 21
    ...sales in North America and Europe although unit sales rose in Asia outside Japan. Revenue from external customers decreased ¥1,119.5 billion, or 14.6%, to ¥6,554.8 billion from the previous fiscal year, due primarily to the decline in unit sales and unfavorable currency translation effects. Honda...

  • Page 22
    ... and superior fuel economy. Honda's unit sales in Japan rose 16.2% over the previous fiscal year, to 646 thousand units, driven mainly by robust sales of the Insight, Fit, StepWGN and Freed as well as other new models. In the area of production, the number of units manufactured in Japan during the...

  • Page 23
    ... in economic conditions. However, Honda automobile sales in North America for the fiscal year decreased 13.3%, to 1,297,000 units, because of the overall shrinkage in market demand. Launch scheduled for fall 2010 Odyssey (North America) In the area of production, based on its policy of "producing...

  • Page 24
    ... this business environment, Honda's unit sales in Europe during the fiscal year declined 28.9% from the previous fiscal year, to 249,000 units. In production activities, Honda began the production of its Jazz in Europe (sold under the Fit name in Japan). This vehicle offers top-class fuel economy...

  • Page 25
    ... 2010, total unit sales in Asia outside Japan rose 19.8% from the previous fiscal year, to 950,000 units. This growth was supported by robust sales of the City in Thailand, India and elsewhere, the new Freed in Indonesia as well as the City, CR-V and the new Spirior in China. In production, to meet...

  • Page 26
    ...Operations Power Product and Other Businesses Percentage of Net Sales by Business Unit Sales Thousands 8,000 6,000 Years ended March 31 80 60 40 Net Sales Yen (billions) 500 400 300 200 100 0 Years ended March 31 3.2 % 4,000 20 2,000 0 0 06 07 08 Japan 09 10 North America Europe Asia 06...

  • Page 27
    ... sales in Europe and North America, which more than offset increased unit sales in Asia. Revenue from external customers decreased ¥65.3 billion, or 19.1%, to ¥277.6 billion, mainly due to the decline in the number of units sold and unfavorable foreign currency translation effects. Honda estimates...

  • Page 28
    ... and quiet. Honda has now launched sales of the EU26i around the world and is working to expand the market by selling not only to professional users but also to households for use in leisure pursuits, for times of emergencies and for other applications. In the outboard motor field, in Japan, Honda...

  • Page 29
    ... of lower sales of pumps and general-purpose engines in the Middle East. Aviation Business In January 2010, subsidiary Honda Aircraft Company, Inc. began construction on its plant at the Piedmont Triad International Airport in Greensboro, North Carolina, in the United States. Honda Aircraft has...

  • Page 30
    ... Current Net Sales Yen (millions) 2009 ¥ 24,083 527,905 12,685 4,736 12,852 ¥582,261 2010 ¥ 24,635 553,169 10,428 4,318 13,802 ¥606,352 % change 2.3% 4.8 (17.8) (8.8) 7.4 4.1% Japan North America Europe Asia Other Regions Total Years ended March 31 Finance Subsidiaries- Receivables...

  • Page 31
    .... Honda estimates that, had the exchange rate remained unchanged from the previous year, total amount of finance subsidiaries-receivables and property on operating leases of finance subsidiaries would have increased about 0.1%. Revenue from external customers in the financial services business...

  • Page 32
    ... product lines. Honda will also work to advance fuel cell technology and steadily promote its new solar cell business. In addition, Honda will further its efforts to minimize its environmental impact. To this end, Honda sets global targets to reduce the environmental burden as measured by the Life...

  • Page 33
    ...in currency exchange and interest rates. Honda is also exposed to the risk that its counterparties to hedging contracts will default on their obligations. Honda manages exposure to counterparty credit risk by limiting the counterparties to major international banks and financial institutions meeting...

  • Page 34
    ...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 can also obtain financing for the lease or purchase of Honda's products...

  • Page 35
    ...meeting of shareholders, each of the Board of Directors and Board of Corporate Auditors determines the compensation amount for each member within the respective maximum total amounts. An NYSE-listed U.S. company must generally obtain shareholder approval with respect to any equity compensation plan...

  • Page 36
    Board of Directors, Corporate Auditors and Operating Officers President and Representative Director Executive Vice President and Representative Director Front row: Takanobu Ito Koichi Kondo Senior Managing Director Senior Managing Director Senior Managing Director Senior Managing Director...

  • Page 37
    ... and Director of Honda Motor Europe Limited Chief Operating Officer for Production Operations Risk Management Officer General Supervisor, Quality General Supervisor, Information Systems Chief Operating Officer for Regional Operations (North America) President and Director of Honda North America...

  • Page 38
    ... Honda Canada Inc. General Manager of Suzuka Factory of Production Operations President and Director of Honda Engineering Co., Ltd. General Manager of Saitama Factory of Production Operations President and Director of Honda Siel Cars India Limited President and Director of Honda Motor India Private...

  • Page 39
    ... 56 Consolidated Statements of Income 57 Consolidated Statements of Changes in Equity 59 Consolidated Statements of Cash Flows 60 Segment Information 65 Basis of Translating Financial Statements 66 Consolidated Balance Sheets Divided into Non-Financial Services Businesses and Finance Subsidiaries...

  • Page 40
    ... March 31, 2010, decreased ¥1,432.0 billion, or 14.3%, to ¥8,579.1 billion from the fiscal year ended March 31, 2009, due mainly to negative foreign currency translation effects and decreased net sales in automobile business. Honda estimates that, by applying Japanese yen exchange rates of the...

  • Page 41
    ...2007 2008 2009 2010 Net Income Attributable to Honda Motor Co., Ltd. (left) Net Income Attributable to Honda Motor Co., Ltd. per Common Share (right) Business Segments Motorcycle Business Honda's unit sales of motorcycles, all-terrain vehicles (ATVs) and personal watercraft (PWC) totaled 9,639...

  • Page 42
    ... Financial Services Business To support the sale of its products, Honda provides retail lending and leasing to customers and wholesale financing to dealers through our finance subsidiaries in Japan, the United States, Canada, the United Kingdom, Germany, Brazil, Thailand and other countries. Total...

  • Page 43
    ... advanced safety performance and address environmental issues. Major achievements in Japan during fiscal 2010 included a full model change on the STEPWGN. The new model lineup provides the largest possible interior space in the 2,000cc-or-lower five series number plate as well as greatly improved...

  • Page 44
    ..., future products. Principal fundamental research initiatives include the public announcement of the U3-X test-model personal mobility unit. This compact, one-wheel personal mobility device combines the balance control technology developed for Honda's ASIMO bipedal humanoid robot with the Honda Omni...

  • Page 45
    ..., 2009 Motorcycle Business Automobile Business Financial Services Business Financial Services Business (Excluding Property on Operating Leases) Power Product and Other Businesses Total Total (Excluding Property on Operating Leases) Note: Intangible assets are not included in the table above. 2010...

  • Page 46
    ..., mainly to introduce new models, upgrade, rationalize and renew production facilities, as well as to expand and reinforce sales and R&D facilities. Honda meets its operating capital requirements primarily through cash generated by operations, bank loans and the issuance of corporate bonds...

  • Page 47
    ...,779 ¥ 85,630 48,217 - 2,120 - ¥135,967 *1 Honda had commitments for purchases of property, plant and equipment at March 31, 2010. *2 To estimate the schedule of interest payments, the Company utilized the balances and average interest rates of borrowings and debts and derivative instruments as...

  • Page 48
    ...product, the geographic location of their sales and other factors. We recognize costs for general warranties on products we sell and product recalls. We provide for estimated warranty costs at the time products are sold to customers or the time new warranty programs are initiated. Estimated warranty...

  • Page 49
    ... the base conditions in fiscal 2010. The following tables summarize our allowance for credit losses on finance receivables and related information in our North American portfolio: Yen (billions) For the year ended March 31, 2008 Direct financing lease Retail Wholesale Total Provisions for credit...

  • Page 50
    ..., which would be recognized over the remaining lease terms. Similarly, if future return rates for our existing portfolio of all Honda and Acura vehicles were to increase by one percentage point from our present estimates, the total impact would be an increase in depreciation expense by approximately...

  • Page 51
    ... and our assumed expected long-term rate of return for fiscal 2010 was 6.5-8.0% for foreign plans. We believe that the accounting estimates related to our pension plans is "critical accounting estimate" because changes in these estimates can materially affect our financial condition and results of...

  • Page 52
    ... exchange risk as well as interest rate risk. The following tables provide information about Honda's financial instruments that were sensitive to changes in interest rates at March 31, 2009 and 2010. For finance receivables and long-term debt, these tables present principal cash ï¬,ows, fair value...

  • Page 53
    ... subsidiaries-receivables included in trade receivables and other assets in the consolidated balance sheets. Long-Term Debt (including current portion) 2009 Yen (millions) 2010 Yen (millions) Expected maturity date Average interest rate Total Fair value Total Within 1 year 1-2 year 2-3 year...

  • Page 54
    ... 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 equity section of the consolidated balance sheets. At March 31, 2009 and 2010, the estimated fair value of marketable equity securities...

  • Page 55
    53

  • Page 56
    ... Motor Co., Ltd. and Subsidiaries March 31, 2009 and 2010 Yen (millions) U.S. dollars (millions) Assets Current assets: Cash and cash equivalents Trade accounts and notes receivable, net of allowance for doubtful accounts of ¥7,455 million in 2009 and ¥8,555 million ($92 million) in 2010 Finance...

  • Page 57
    ... 7,086,000,000 shares; issued 1,834,828,430 shares Capital surplus Legal reserves Retained earnings Accumulated other comprehensive income (loss), net Treasury stock, at cost 20,219,430 shares in 2009 and 20,225,694 shares in 2010 Total Honda Motor Co., Ltd. shareholders' equity 86,067 172,529...

  • Page 58
    Consolidated Statements of Income Honda Motor Co., Ltd. and Subsidiaries Years ended March 31, 2008, 2009 and 2010 Yen (millions) U.S. dollars (millions) 2008 Net sales and other operating revenue Operating costs and expenses: Cost of sales Selling, general and administrative Research...and equity in ...

  • Page 59
    Consolidated Statements of Changes in Equity Honda Motor Co., Ltd. and Subsidiaries Years ended March 31, 2008, 2009 and 2010 Yen (millions) Accumulated other comprehensive income (loss), net Total Honda Motor Co., Ltd. shareholders' equity Common stock Capital surplus Legal reserves Retained ...

  • Page 60
    ... Statements of Changes in Equity Yen (millions) Accumulated other comprehensive income (loss), net Total Honda Motor Co., Ltd. shareholders' equity Common stock Capital surplus Legal reserves Retained earnings Treasury stock Noncontrolling interests Total equity Balance at March 31, 2009...

  • Page 61
    ...activities: Increase (decrease) in short-term debt, net Proceeds from long-term debt Repayments of long-term debt Dividends paid Dividends paid to noncontrolling interests Sales (purchases) of treasury stock, net Net cash provided by (used in) financing activities Effect of exchange rate changes on...

  • Page 62
    ... with the accounting policies used in Honda's consolidated financial statements. Principal products and services, and functions of each segment are as follows: Segment Motorcycle business Principal products and services Motorcycles, all-terrain vehicles (ATVs), personal watercrafts and relevant...

  • Page 63
    ...ended March 31, 2009 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 ¥1,411,511 Intersegment - Total Cost of sales, SG&A and...

  • Page 64
    ...year ended March 31, 2010 U.S. dollars (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...

  • Page 65
    ... required by U.S. GAAP, Honda provides the following supplemental information as required by Financial Instruments and Exchange Law: (1) Overseas sales and revenues based on the location of the customer Yen (millions) U.S. dollars (millions) 2008 North America Europe Asia Other regions ¥6,068...

  • Page 66
    ... geographical information based on the location of the Company and its subsidiaries 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...

  • Page 67
    ... March 31, 2010 U.S dollars (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 Cost of sales, SG&A and R&D expenses Operating income (loss) Assets Long-lived...

  • Page 68
    ...At March 31, 2009 and 2010 Assets Non-financial services businesses Current assets: Cash and cash equivalents Trade accounts and notes receivable, net Inventories Other current assets Investments and advances Property, plant and equipment, net Other assets Total assets Finance Subsidiaries Cash and...

  • Page 69
    ... of Statement of Financial Accounting Standards No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51", effective April 1, 2009. Upon the adoption of ASC 810, presentation of cash ï¬,ows has been changed. 2. Non-financial services businesses lend...

  • Page 70
    ... of sales Cash dividends paid during the period Research and development Interest expense Assets, long-term debt, and shareholders' equity Total assets Long-term debt Total Honda Motor Co., Ltd. shareholders' equity Capital expenditures (excluding purchase of operating lease assets) Purchase...

  • Page 71
    ...743 4,488,825 627,066 366,795 361,747 9,741 2008 ¥12,002,834 953,109 895,841 387,436 118...4,550,479 654,030 839,261 417,393 101,032 2009 ¥10,011,241 189,643 161,734 109,835 99...2010 $ 92,210 3,910 3,613 1,578 1,003 (153) 2,885 663 4,980 135 $124,990 24,861 46,525 3,751 5,847 4,318 2,450 U.S. dollars...

  • Page 72
    ...., Ltd. 173,397 123,316 20,242 Basic net income (loss) attributable to Honda Motor Co., Ltd. ¥95.56 ¥67.96 ¥11.16 Tokyo Stock Exchange: (TSE) (in yen) High ¥3,910 ¥3,850 ¥3,190 Low 2,765 3,000 1,643 New York Stock Exchange: (NYSE) (in U.S. dollars) High $36.40 $35.67 $30.08 Low 27.69 28.20 17...

  • Page 73
    Investor Information 71

  • Page 74
    ... IR฀Web฀Sites Japanese: http://www.honda.co.jp/investors/ English: http://world.honda.com/investors/ Stock Information Securities Code Number of Shares Authorized Total Number of Shares Issued Number of Shareholders Number of Shares per Trading Unit Stock Exchange Listings General Meeting of...

  • Page 75
    ... in the "Investor Relations" section on our web site. Major Shareholders Individual or Organization Number of shares held (thousands) Percentage of total shares outstanding (%) Japan Trustee Services Bank, Ltd. (Trust Account) The Master Trust Bank of Japan, Ltd. (Trust Account) JPMorgan Chase...

  • Page 76
    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