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Annual Report 2011
Year Ended March 31, 2011
Honda Motor Co., Ltd.

Table of contents

  • Page 1
    Annual Report 2011 Honda Motor Co., Ltd. Year Ended March 31, 2011

  • Page 2
    ...filiates 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 worldwide. *As of March 31, 2011 Caution with Respect to Forward-Looking Statements This annual report contains "forward...

  • Page 3
    ....com/environment/report/ Philanthropy Available on the Internet at the following URL: http://world.honda.com/community/ On the cover: Honda Civic (North American model) The all-new Civic went on sale nationwide in the United States in April 2011. This new Civic is the ninth-generation model, and...

  • Page 4
    ...2009 2010 2011 190 185 202 1,690 582 198 266 Japan North Europe America Asia Other Regions Japan North Europe America Asia Other Regions The Power of Dreams Dreams inspire us to create innovative products that enhance mobility and benefit society. To meet the particular needs of customers...

  • Page 5
    ... 0 -20 300 150 0 Yen (billions) 600 450 6.3% Yen (billions) 200 150 100 50 0 07 08 09 10 11 07 08 09 10 11 2,085 1,325 Locations 1,174 Germany U.K. 537 Thailand Japan U.S.A. Canada 388 Brazil Japan North Europe America Asia Other Regions 3

  • Page 6
    ... 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 Motor Co...

  • Page 7
    ...16.1% Japan North America Europe Asia Other Regions Total 1,458 12.4 198 (20.5) 1,008 266 3,512 6.1 6.4 3.5 % Net Sales Breakdown Yen (millions) Motorcycle Business Automobile Business Financial Services Business Power Product and Other Businesses 2010 2011 Change (0.3)% (7.0) 2010 ¥1,383...

  • Page 8
    ...rst like to thank you, our shareholders, for your continuing interest in Honda's business activities and for your ongoing support. We also would like to express our deepest sympathies to those who suffered losses and injuries as a result of the Great East Japan Earthquake and tsunami. Our thoughts...

  • Page 9
    ... i as well as sales in India of the new CB Twister and the Activa acted as driving forces in bringing a major gain in sales. On the other hand, in North America, where demand did not fully recover, despite a moderate recovery mainly in the sales of utility all-terrain vehicles (ATVs), recovery in...

  • Page 10
    ... In North America, Europe, Japan and other regions, including South America, along with the increase in demand for construction equipment accompanying the economic recovery, unit sales of general-purpose engines, mainly on an OEM basis, increased. In Asia, unit sales grew along with market expansion...

  • Page 11
    ... strengthen our business position in the markets of emerging countries and, at the same time, restructure our corporate organization to secure profitability. With this awareness, we have positioned the next 10 years as a time for Honda to reform in the direction of "delivering good products to our...

  • Page 12
    ... bike market in Africa, where about 800,000 motorcycles are sold a year. By using highly competitive parts manufactured in China, Honda is able to offer these bikes to customers in Nigeria at affordable prices. In new markets, competition is tough because motorcycle manufacturers in China and India...

  • Page 13
    ... that is scheduled to launch in Thailand and India in 2011. In the mini-vehicle segment, in Japan total new cars sold in 2010 amounted to about 1.73 million units, while the number of registrated vehicles sold was about 3.23 million units. Thus, in terms of units, mini-vehicles accounted for more...

  • Page 14
    ... and market new energy-creation products, such as solar power panels and small cogeneration units for household use. For Honda, the next 10 years will be crucial in determining whether we can successfully survive the major changes taking place in business conditions: namely, the "increased awareness...

  • Page 15
    ... are scheduled to pay quarterly dividends of ¥15 per share, or ¥60 per share for the full year, which will be ¥6 per share higher than in fiscal 2011. 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...

  • Page 16
    Review of Operations Unit Sales Thousands 12,000 Thousands 2010 190 189 199 7,628 1,433 9,639 2011 190 185 202 9,178 1,690 11,445 % change 0.0 % (2.1) 1.5 20.3 17.9 18.7 % Japan 8,000 North America Europe Asia Other Regions Total 07 08 09 10 Europe 4,000 0 11 Asia Other Regions Japan ...

  • Page 17
    Motorcycle Business Honda's unit sales of motorcycles and all-terrain vehicles (ATVs) totaled 11,445 thousand units, an increase of 18.7% compared with the previous fiscal year, due mainly to an increase in unit sales in Asia and Other Regions, including South America. Revenue from external ...

  • Page 18
    ..., a commercial-use scooter that emits zero CO2 emissions, was made available on lease. * Source: JAMA (Japan Automobile Manufacturers Association) Four Trax Rancher (North America) North America Total demand for motorcycles and all-terrain vehicles (ATVs) in the United States during calendar 2010...

  • Page 19
    Goldwing (North America) Europe Total demand for motorcycles in Europe* during calendar 2010 declined about 13%, to approximately 920 thousand units. This major drop in demand was due to a number of factors, including a reactionary decline following the end of subsidies for motorcycle purchases in ...

  • Page 20
    ... in the Indian market. Combined with expansion in capacity at the existing plant, when the second plant goes into operation in the first half of calendar 2012, Honda Motorcycle & Scooter India is scheduled to have annual production capacity of approximately 2.8 million units. Additionally, when the...

  • Page 21
    ...on Honda research, the motorcycle registration market includes eight countries: Thailand, Indonesia, Malaysia, the Philippines, Vietnam, India, Pakistan and China. * 2: This total includes sales of completed products of the Company and its consolidated subsidiaries and unit sales of parts for use in...

  • Page 22
    Review of Operations Unit Sales Thousands 4,000 3,000 2,000 1,000 0 Thousands 2010 646 1,297 249 950 250 3,392 2011 582 1,458 198 1,008 266 3,512 % change (9.9)% 12.4 (20.5) 6.1 6.4 3.5 % Japan North America Europe Asia Other Regions 07 Japan 08 09 10 Europe 11 Asia Total Other Regions ...

  • Page 23
    Automobile Business Honda's unit sales of automobiles totaled 3,512 thousand units, an increase of 3.5% compared with the previous fiscal year, due mainly to an increase in unit sales in North America and Asia, which was partially offset by decreases in unit sales in Japan and Europe. Revenue from...

  • Page 24
    ... activities, unit output for the domestic market decreased following the termination of the ecoFit Hybrid (Japan) car subsidies, but exports increased, with particularly strong unit sales of CR-V models in North America. During the fiscal year under review, Honda's domestic unit production of...

  • Page 25
    ... credit policies in the principal countries of the region, and marked declines were reported, especially in markets targeting individual retail customers. On the other hand, in Russia*2, sales increased about 30%, to approximately 1.91 million units. Honda's consolidated unit sales in Europe...

  • Page 26
    ... construction of a second plant in response to continued expansion in demand in China's automobile market. Within the latter half of calendar 2012, Dongfeng Honda's Li Nian S1 (China) total annual production capacity is scheduled to increase to 340 thousand units. * 1: Source: China Association...

  • Page 27
    ...approximately 1.04 million units, supported by continued favorable economic conditions.*2 Honda's total sales in Other regions expanded 6.4%, to 266 thousand units, due primarily to increased sales of the City in Brazil, despite intensified competition in Australia and decreased sales in the Middle...

  • Page 28
    Review of Operations Unit Sales Thousands 8,000 6,000 4,000 2,000 0 Thousands 2010 322 1,818 1,066 1,069 469 4,744 2011 388 2,085 1,174 1,325 537 5,509 % change 20.5 % 14.7 10.1 23.9 14.5 16.1 % Japan North America Europe Asia Other Regions 07 Japan 08 09 10 Europe 11 Asia Total Other ...

  • Page 29
    ... units, because of strong demand for general-purpose engines for OEM use in construction machinery and generators as well as sales of snow blowers, despite intensified competition in the lawn mower market. Aviation Business In April 2011, a Honda aero business subsidiary, Honda Aircraft Company...

  • Page 30
    ... ¥606,352 2011 ¥ 26,349 503,960 9,263 3,728 18,596 ¥561,896 % change 7.0 % (8.9) (11.2) (13.7) 34.7 (7.3)% Japan North America Europe Asia Other Regions 07 Japan 08 09 10 Europe 11 Asia Total Other Regions North America Finance Receivables and Property on Operating Leases Yen (billions...

  • Page 31
    ... 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. The total...

  • Page 32
    ... lines through the innovative use of IT and will show its continued commitment to different customers throughout the world by upgrading its sales and service structure. 4. Product Quality In response to increasing customer demand, Honda will upgrade its quality control by enhancing the functions...

  • Page 33
    ... in pursuit of its vision for the Company as it moves towards 2020: "To provide good products in a timely fashion, at affordable prices, and with low CO2 emissions". 8. Immediate Issues for Attention The Company temporarily suspended production at its sites located in Japan due to the effects...

  • Page 34
    ... in Honda's major markets or worldwide, leading, potentially, to further increased price pressure. Price volatility in any or all of Honda's markets could adversely affect Honda's results of operations in a particular period. Risks Relating to Honda's Business Generally - Currency and Interest Rate...

  • Page 35
    ... intellectual property Regulations regarding vehicle emission levels, fuel economy, noise and safety and noxious substances, as well as levels of pollutants from production plants, are extensive within the automobile, motorcycle and power product industries. These regulations are subject to change...

  • Page 36
    ... financing services, including commercial banks and finance and leasing companies. The financial services offered by us also involve credit risk as well as risks relating to lease residual values, cost of capital and access to funding. Competition for customers and/or these risks may affect Honda...

  • Page 37
    ... the discount rate, the rate of salary increase and the expected long-term rate of return on plan assets. Differences in actual expenses and costs or changes in assumptions could affect Honda's pension costs and benefit obligations, including Honda's cash requirements to fund such obligations...

  • Page 38
    ... is usually made at an ordinary general meeting of shareholders held in June. The payment of quarterly dividends requires a resolution of the Company's board of directors. If the board adopts such a resolution, the dividend payment is made to shareholders as of the applicable record dates, which...

  • Page 39
    ... listed on the New York Stock Exchange (the "NYSE") must comply with certain standards regarding corporate governance under Section 303A of the NYSE Listed Company Manual. However, listed companies that are foreign private issuers, such as Honda, are permitted to follow home-country practice in lieu...

  • Page 40
    ...Corporate Auditors and Operating Officers Front row: Chairman and Representative Director President, Chief Executive Officer and Representative Director Executive Vice President, Executive Officer and Representative Director Koichi Kondo Takanobu Ito Akio Hamada Back row: Senior Managing...

  • Page 41
    ...Operating Officer for Business Support Operations Note: Mr. Kensaku Hogen and Mr. Nobuo Kuroyanagi satisfy the required conditions for the outside director provided for in Article 2, Paragraph 1, Item 15 of the Company Law. Corporate Auditors Corporate Auditor (Full-time) Toru Onda Hideki Okada...

  • Page 42
    ... for Regional Operations (North America) President and Director of Honda North America, Inc. President and Director of American Honda Motor Co., Inc. Chief Operating Officer for Motorcycle Operations Chief Officer of Driving Safety Promotion Center Chief Operating Officer for Business Management...

  • Page 43
    ... Review 58 Consolidated Balance Sheets 60 Consolidated Statements of Income 61 Consolidated Statements of Changes in Equity 63 Consolidated Statements of Cash Flows 64 Segment Information 69 Basis of Translating Financial Statements 70 Consolidated Balance Sheets Divided into Non-Financial Services...

  • Page 44
    ... ended March 31, 2010, due mainly to increased net sales in automobile business and motorcycle business, which was partially offset by a decrease in net sales attributable to negative foreign currency translation effects. Honda estimates that by applying Japanese yen exchange rates of the previous...

  • Page 45
    ...) Business Segments Motorcycle Business Honda's unit sales of motorcycles and all-terrain vehicles (ATVs) totaled 11,445 thousand units and increased by 18.7% from the previous fiscal year, due mainly to an increase in unit sales in Asia and Other Regions, including South America. Revenue from...

  • Page 46
    ... of power products, which was partially offset by increased selling, general and administrative expenses and negative foreign currency effects. Financial Services Business To support the sale of its products, Honda provides retail lending and leasing to customers and wholesale financing to dealers...

  • Page 47
    ... in Japan and Honda Engineering North America, Inc. in the United States. All of these entities work in close association with our other entities and businesses in their respective regions. Total consolidated R&D expenses for the fiscal year ended March 31, 2011 amounted to ¥487.5 billion. secure...

  • Page 48
    ... the market. Looking to launch these units, we are working to further increase their module conversion ratio. In other businesses in this segment, Honda Aircraft Company, Inc., our U.S. subsidiary in the jet aircraft business, reported that the mass production model of HondaJet, a light business jet...

  • Page 49
    ... of sales and R&D facilities. A new auto plant of Honda Motor De Argentina S.A., which is one of the Company's consolidated subsidiaries, completed construction of its facilities in March 2011. In the financial services business segment, capital expenditures excluding property on operating leases...

  • Page 50
    ... 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. Honda requires operating capital mainly to purchase parts and raw...

  • Page 51
    ...,778 ¥117,746 44,198 - 2,511 - ¥164,445 *1 Honda had commitments for purchases of property, plant and equipment at March 31, 2011. *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 52
    ... of the 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...

  • Page 53
    ...and leasing to customers and wholesale financing to dealers primarily to support sales of our products. Honda classifies retail and direct financing lease receivables derived from those services as finance subsidiaries-receivables. Operating leases are classified as property on operating leases...

  • Page 54
    ...% The following table provides information related to losses on operating leases due to customer defaults: Yen (billions) 2009 Provision for credit losses on past due rental payments Impairment losses on operating leases due to early termination ¥2.0 ¥8.7 2010 ¥1.9 ¥3.3 2011 ¥1.6 ¥0.8 52

  • Page 55
    ... in auction values are likely to have a negative effect on return rates which could affect the sensitivities. Fiscal Year 2011 Compared with Fiscal Year 2010 Used vehicle prices continued to improve during fiscal year 2011 due in part to the low supply of used vehicles. Losses related to lease...

  • Page 56
    ...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. Japanese Plans Assumptions Percentage point change (%) Funded status Equity Yen...

  • Page 57
    ... currency exchanges rates, in interest rates and in prices of marketable equity securities. Honda is a party to derivative financial instruments 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...

  • Page 58
    ..." securities and is reported at fair value. *3 The finance subsidiaries-receivables include finance subsidiaries-receivables included in trade accounts and notes receivables and other assets in the consolidated balance sheets. Long-Term Debt (including current portion) 2010 Yen (millions) 2011...

  • Page 59
    ... 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, 2010 and 2011, the estimated fair values of marketable equity securities...

  • Page 60
    Consolidated Balance Sheets March 31, 2010 and 2011 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 ¥8,555 million in 2010 and ¥7,904 million ($95 million) in 2011 Finance ...

  • Page 61
    ...1,834,828,430 shares in 2010 and 1,811,428,430 shares in 2011 Capital surplus Legal reserves Retained earnings Accumulated other comprehensive income (loss), net Treasury stock, at cost 20,225,694 shares in 2010 and 9,126,716 shares in 2011 Total Honda Motor Co., Ltd. shareholders' equity 86,067 172...

  • Page 62
    ...Statements of Income Years ended March 31, 2009, 2010 and 2011 Yen (millions) U.S. dollars (millions) 2009 Net sales and other operating revenue Operating costs and expenses: Cost of sales Selling...(46,601) (27,909) Income before income taxes and equity in income of affiliates 161,734 18,232 (12,552...

  • Page 63
    Consolidated Statements of Changes in Equity Years ended March 31, 2009, 2010 and 2011 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 ...

  • Page 64
    ...), 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, 2010 $1,035 Cumulative effect of adjustments resulting from the adoption of new accounting standards...

  • Page 65
    ...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 66
    ... 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), and relevant parts Automobile business...

  • Page 67
    ...the year ended March 31, 2010 Yen (millions) Financial Services Business Power Product and Other Businesses Motorcycle Business Automobile Business Segment Total Reconciling Items Other Adjustments Consolidated Net sales and other operating revenue: External customers ¥1,140,292 Intersegment...

  • Page 68
    ...31, 2011 U.S. dollars (millions) Financial Services Business Power Product and Other Businesses Motorcycle Business Automobile Business Segment Total Reconciling Items Other Adjustments Consolidated Net sales and other operating revenue: External customers Intersegment Total Cost of sales, SG...

  • Page 69
    ... for the year ended March 31, 2011 U.S. dollars (millions) Japan United States Other Countries Total Sales to external customers Long-lived assets $22,057 12,666 $42,150 21,249 $43,272 6,874 $107,479 40,789 The above information is based on the location of the Company and its subsidiaries. 67

  • Page 70
    ... information based on the location of the Company and its subsidiaries As of and for the year ended March 31, 2009 Yen (millions) Japan North America Europe Asia Other Regions Total Reconciling Items Other Adjustments Consolidated Net sales and other operating revenue: External customers Transfers...

  • Page 71
    ...the year ended March 31, 2011 U.S dollars (millions) Japan North America Europe Asia Other Regions Total Reconciling Items Other Adjustments Consolidated Net sales and other operating revenue: External customers Transfers between geographic areas Total Cost of sales, SG&A and R&D expenses Operating...

  • Page 72
    ...-term receivables, net Net property on operating leases Other assets Total assets Reconciling items Total assets Liabilities and Equity Non-financial services businesses Current liabilities: Short-term debt Current portion of long-term debt Trade payables Accrued expenses Other current liabilities...

  • Page 73
    ... of investments in affiliates 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 Cash ï¬,ows from...

  • Page 74
    ... shareholders' equity Total assets Long-term debt Total Honda Motor Co., Ltd. shareholders' equity Capital expenditures (excluding purchase of operating lease assets) Purchase of operating lease assets Depreciation (excluding property on operating leases) Depreciation of property on operating leases...

  • Page 75
    ...400 1,879,000 4,125,750 457,841 262,225 2007 ¥11,087,140 851,879 792,868 283,846 103... 4,007,288 633,913 668,128 441,868 195,776 2010 ¥ 8,579,174 363,775 336,198 146,869 93,...2011 $107,479 6,852 7,583 2,487 1,681 (354) 6,423 1,108 5,864 102 $139,157 24,573 53,517 3,928 9,602 4,227 2,551 U.S. dollars...

  • Page 76
    ...7,560 54,037 134,627 Basic net income attributable to Honda Motor Co., Ltd. ¥4.17 ¥29.78 ¥74.19 Tokyo Stock Exchange: (TSE) (in yen) High ¥3,070 ¥3,230 ¥3,170 Low 2,390 2,300 2,590 New York Stock Exchange: (NYSE) (in U.S. dollars) High $31.00 $32.99 $34.52 Low 24.83 25.00 28.82 ¥2,279,567 96...

  • Page 77
    Investor Information 75

  • Page 78
    ...) Number of Shares per Trading Unit 100 shares Stock Exchange Listings Japan: Tokyo, Osaka stock exchanges Overseas: New York, London stock exchanges General Meeting of Shareholders Record Dates for Dividends June June 30 September 30 December 31 March 31 U.S.A. Honda North America, Inc. New York...

  • Page 79
    ... the Company's common stock or ADRs by non-residents of Japan, please also refer to "Item 10E. Taxation" of Form 20-F included in the "Investor Relations" section on our web site. Major Shareholders Individual or Organization Number of shares held (thousands) Percentage of total shares outstanding...

  • Page 80
    Printed in Japan