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Honda Motor Co., Ltd Annual Report 2012
Annual Report 2012
Year Ended March 31, 2012
Honda Motor Co., Ltd.

Table of contents

  • Page 1
    Honda Motor Co., Ltd. Annual Report 2012 Year Ended March 31, 2012

  • Page 2
    ...'s largest motorcycle manufacturer and one of the leading automakers. With a global network of 378* subsidiaries and 88* 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 3
    ... 22 Power Product and Other Businesses 23 Financial Services Business 24 29 30 32 65 Risk Factors Corporate Governance Board of Directors, Corporate Auditors and Operating Officers Financial Section Investor Relations Information Introducing Honda's Activities and Publications CSR Report...

  • 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 and development centers, and manufacturing facilities in each region. Furthermore, as a socially responsible corporate...

  • Page 5
    R OF PHOTOS A: Acura RDX B: Gold Wing C: Acura ILX D: NC700S E: Acura RLX Concept B D E Honda Motor Co., Ltd. 03

  • Page 6
    ...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 (Yen / U.S. dollar) Net income attributable to Honda Motor Co., Ltd. Dividends paid Total Honda Motor...

  • Page 7
    ... Ito President & Chief Executive Officer We would like to express our heartfelt thanks to all of our shareholders for your continued interest and ongoing support for Honda's business activities. We would also like to extend our sincere gratitude to all of our customers, suppliers and those who...

  • Page 8
    ... products business operations, sales of assembled machinery such as trimmers were strong in North America, while sales of pumps were strong in Asia on the back of market expansion. Future Initiatives Straight back onto a growth trajectory Fiscal 2012 was a year of trials and tribulations for Honda...

  • Page 9
    ...range of customer needs. The sharing of a single engine and transmission platform among models will also enable production efficiencies that translate into a more competitive price in the marketplace. Striving to realize new possibilities without being constrained by conventional thinking is part of...

  • Page 10
    ... electric vehicle (FCEV). In November 2011, we unveiled our new "Earth Dreams Technology" program featuring next-generation engine and transmission technologies which realize a further advance in environmental performance. Going forward, we plan to develop products based on these new technologies to...

  • Page 11
    ... next-generation sports car at the North American International Auto Show held in Detroit, U.S., in January 2012. The NSX Concept , which is being developed with hybrid technology serving in a key role, will be emblematic of the new generation of sports supercars. At the same show we debuted the ILX...

  • Page 12
    .... Since then, we have developed products based on our core engine technologies that help people get things done in a variety of situations and our current product line-up ranges from tillers, generators and outboard motors to water pumps, lawn mowers and snow blowers. The demand for such general...

  • Page 13
    ... and satisfaction to our customers through the creation of advanced technologies and products. We look forward to the continued and long-term understanding and support of our shareholders and other investors. June 21, 2012 Takanobu Ito President & Chief Executive Officer Honda Motor Co., Ltd. 11

  • Page 14
    ... Income (Loss) (right scale) Unit Sales by Region (Thousands) Unit Sales by Region (Thousands) 9,910 1,323 874 580 2,031 158 202 220 Japan 2010 2011 200 North America 2012 198 Europe Asia Other Regions 2010 Japan 2011 North America 2012 Europe Asia Other Regions 12 Annual Report 2012

  • Page 15
    ... scale) Unit Sales by Region (Thousands) Finance Receivables / Property on Operating Leases Yen (billions) 2,314 6,000 1,473 1,472 1,121 520 2,000 4,000 3,446 392 Japan 2010 2011 North America 2012 Europe Asia Other Regions 0 Finance Receivables Property on Operating Leases Honda...

  • Page 16
    ... to increased sales in India and Vietnam in line with expanded production capacity, as well as to strong sales in Brazil. CROSSTOURER (Europe) Net Sales by Region Yen (billions) 2008 2009 2010 2011 2012 % change Yen (billions) 1,800 (%) 12.0 Japan North America Europe Asia Other...

  • Page 17
    ... thousand units, due to decline in industry demand for sport ATVs, which more than offset favorable sales of utility ATVs, such as Four Trax Foreman 4x4, which underwent a full model change. * Source: MIC (Motorcycle Industry Council) Four Trax Foreman 4x4 (North America) Honda Motor Co., Ltd. 15

  • Page 18
    ... global strategic road sports CBR250R model the newly-launched scooter model Vision110 as well as a modest contribution from the NC700S, which was launched in the last month of the fiscal year. * Based on Honda research, the motorcycle registration market for Europe includes 10 countries: the United...

  • Page 19
    ... accounted for under the equity method, announced plans to build a fourth factory specifically for scooters. With an annual production capacity of around 1,100 thousand units, the plant will help Honda meet burgeoning demand in the Indonesian market. By the autumn of 2013, the company's annual...

  • Page 20
    ... in Thailand, which inundated local production facilities. Acura ILX (North America) Net Sales by Region Yen (billions) 2008 2009 2010 2011 2012 % change Yen (billions) 10,000 7,500 5,000 2,500 (%) 8.0 6.0 4.0 2.0 0.0 Japan North America Europe Asia Other Regions Total ¥1,321.0 ¥1,225...

  • Page 21
    ..., to 1,323 thousand units. The launch of the fully remodeled Civic and CR-V models generated sales, but supply constraints caused by supply chain disruptions from the Great East Japan Earthquake had a negative impact on vehicle availability. Civic Si Sedan (North America) Honda Motor Co., Ltd. 19

  • Page 22
    ... units in order to meet expected market expansion in the compact car segment. This move is expected to raise Honda's annual automobile production capacity in North America to 1.87 million units by the first half of 2014. * Source: Ward's Auto EUROPE During calendar year 2011, total demand in...

  • Page 23
    ... 2012. P.T. Honda Prospect Motor, a consolidated subsidiary in Indonesia, announced plans to construct a new automobile factory with an annual production capacity of 120 thousand units for production of the BRIO and other compact cars. This new facility is expected to raise the company's annual...

  • Page 24
    ... units, mainly due to strong sales of completed products such as pumps and lawn mowers in Asia and Europe. Net Sales by Region Yen (billions) 2008 2009 2010 2011 2012 % change Yen (billions) 500 400 300 200 100 0 -100 (%) 30.0 24.0 18.0 12.0 6.0 0.0 Japan North America Europe Asia Other...

  • Page 25
    ... 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...

  • Page 26
    ...of operations. Risks Relating to Honda's Business Generally Currency and Interest Rate Risks 1. Honda's operations are subject to currency fluctuations Honda has manufacturing operations throughout the world, including Japan, and exports products and components to various countries. Honda purchases...

  • Page 27
    ... climate changes. The costs to comply with these regulations can be significant to Honda's operations. 2. Honda is reliant on the protection and preservation of its intellectual property Honda owns or otherwise has rights in a number of patents and trademarks relating to the products it manufactures...

  • Page 28
    ... with inherent risks Honda's Financial services business offers various financing plans to its customers 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 through...

  • Page 29
    ... of service and compensation. The funding policy is to make periodic contributions as required by applicable regulations. Benefit obligations and pension costs are based on assumptions of many factors, including the discount rate, the rate of salary increase and the expected long-term rate of return...

  • Page 30
    ... its directors, executive officers and corporate auditors reside in Japan. All or substantially all of the Company's assets and the assets of these persons are located in Japan and elsewhere outside the United States. It may not be possible, therefore, for U.S. investors to effect service of process...

  • Page 31
    ... entirely of independent directors. A NYSE-listed U.S. company must generally obtain shareholder approval with respect to any equity compensation plan. * For information about Honda's corporate governance practices, please refer to (http://world.honda.com/CSR/governance) Honda Motor Co., Ltd. 29

  • Page 32
    Board of Directors, Corporate Auditors and Operating Officers Senior Managing Officer Senior Managing Officer and Director Senior Managing Officer and Director President, Chief Executive Officer and Representative Director Executive Vice President, Executive Officer and Representative Director...

  • Page 33
    ... Chief Executive Officer and Director of Honda Engineering Co., Ltd. Kohei Takeuchi General Manager of Accounting Division for Business Management Operations Katsushi Watanabe General Manager of Kumamoto Factory of Production Operations Hiroyuki Yamada Chief Operating Officer for Customer Service...

  • Page 34
    ... 54 Financial Review Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Changes in Equity Consolidated Statements of Cash Flows Segment Information 60 61 62 64 Consolidated Balance Sheets Divided into Non-Financial Services Businesses and Finance Subsidiaries...

  • Page 35
    ... mainly to decreased net sales in Automobile business by the Great East Japan Earthquake, the floods in Thailand and negative foreign currency translation effects, which was partially offset by increased net sales in Motorcycle business. Honda estimates that by applying Japanese yen exchange rates...

  • Page 36
    ... and negative foreign currency effects. Power Product and Other Businesses Honda's unit sales of power products totaled 5,819 thousand units, increased by 5.6% from the previous fiscal year, due mainly to an increase in unit sales in North America and Asia. Revenue from external customers decreased...

  • Page 37
    ...mix, increased R&D expenses and negative foreign currency effects, which was partially offset by decreased selling, general and administrative expenses. Financial Services Business To support the sale of its products, Honda provides retail lending and leasing to customers and wholesale financing to...

  • Page 38
    .... Among our major achievements in Japan during fiscal year 2012, we launched the N Box, which brings together Honda's original center-tank-layout and a newly developed powerplant to create one of the most spacious interiors ever offered in a mini vehicle. In North America, Asia and other regions...

  • Page 39
    ... supporting business operations. Principal developments in this area included the sales launch to gas utility companies of a new model gas enginebased cogeneration unit for household use. This high-efficiency, household-use combined heat and power supply system, the MCHP1.0K2, generates power using...

  • Page 40
    ... 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. Honda requires working capital mainly to purchase parts and...

  • Page 41
    ...199,624 Contributions to defined benefit pension plans*3 *1 Honda had commitments for purchases of property, plant and equipment at March 31, 2012. *2 To estimate the schedule of interest payments, the company utilized the balances and average interest rates of borrowings and debts and derivative...

  • Page 42
    ...warranties during the period for the fiscal year ended March 31, 2012, was ¥17.6 billion, due mainly to the change of the expected level of future warranty costs, including the expected number of units to be affected and estimated average repair cost per unit for product recalls. 40 Annual Report...

  • Page 43
    ... 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. Certain finance receivables related to sales of inventory are included in trade accounts and...

  • Page 44
    ... information related to losses on operating leases due to customer defaults: Yen (billions) Fiscal years ended March 31 2011 2012 Provision for credit losses on past due rental payments Impairment losses on operating leases due to early termination ¥1.6 ¥0.8 ¥1.1 ¥1.5 Fiscal Year 2012...

  • Page 45
    ...our employees in Japan and certain employees in foreign countries. Benefit obligations and pension costs are based on assumptions of many factors, including the discount rate, the rate of salary increase and the expected long-term rate of return on plan assets. The discount rate is determined mainly...

  • Page 46
    ... long-term rate of return for fiscal 2012 was 6.5~7.5% 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 operations. Actual...

  • Page 47
    ... 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 48
    ... of direct financing leases is not required. *2 The finance subsidiaries-receivables include finance subsidiaries-receivables contained in trade accounts and notes receivable and other assets in the consolidated balance sheets. Long-Term Debt (including current portion) Years ended March 31 2011...

  • Page 49
    ... section of the consolidated balance sheets. At March 31, 2011 and 2012, the estimated fair values of marketable equity securities were ¥92.4 billion and ¥100.8 billion, respectively. Legal Proceedings With respect to product liability, personal injury claims or lawsuits, we believe that any...

  • Page 50
    ...assets Finance subsidiaries-receivables, net Investments and advances: Investments in and advances to affiliates Other, including marketable equity securities Total investments and advances Property on operating leases: Vehicles Less accumulated depreciation Net property on operating leases Property...

  • Page 51
    ...Ltd. shareholders' equity: Common stock, authorized 7,086,000,000 shares; issued 1,811,428,430 shares Capital surplus Legal reserves Retained earnings Accumulated other comprehensive income (loss), net Treasury stock, at cost 9,126,716 shares in 2011 and 9,128,871 shares in 2012 Total Honda Motor Co...

  • Page 52
    ...,477 29,389 ¥ 534,088 86,074 49,661 135,735 121,668 100,406 222,074 10,592 ¥ 211,482 Yen 1,048 604 1,652 1,480 1,222 2,702 129 $ 2,573 U.S. dollars 2011 2012 2012 Basic net income attributable to Honda Motor Co., Ltd. per common share ¥ 295.67 ¥ 117.34 $ 1.43 50 Annual Report 2012

  • Page 53
    Consolidated Statements of Changes in Equity Years ended March 31, 2011 and 2012 Yen (millions) Accumulated other comprehensive Retained income earnings (loss), net Total Honda Motor Co., Ltd. shareholders' equity Common stock Capital surplus Legal reserves Treasury stock Noncontrolling ...

  • Page 54
    ...earnings Total Honda Motor Co., Ltd. shareholders' equity Common stock Capital surplus Legal reserves Treasury stock Noncontrolling interests Total equity Balance at March 31, 2011 Transfer to legal reserves Dividends paid to Honda Motor Co., Ltd. shareholders Dividends paid to noncontrolling...

  • Page 55
    ...from financing 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 used in financing activities Effect of exchange rate changes on...

  • Page 56
    ... and lease related to Honda products Others Research & Development Manufacturing Sales and related services Others Automobile Business Financial Services Business Power Product and Other Businesses Financial, insurance services Power products and relevant parts, and others Segment Information As...

  • Page 57
    ... year ended March 31, 2012 Yen (millions) Financial Services Business Power Product and Other Businesses Motorcycle Business Automobile Business Segment Total Reconciling Other Items Adjustments Consolidated Net sales and other operating revenue: External customers Intersegment Total Cost of...

  • Page 58
    ... of property on operating leases. 6. Capital expenditures of Financial services business includes ¥798,420 million for the year ended March 31, 2011 and ¥683,767 million for the year ended March 31, 2012, respectively, purchases of operating lease assets. 7. The amounts of Net sales and...

  • Page 59
    ... Sales and Other Operating Revenue by Product or Service Groups Yen (millions) U.S. dollars (millions) 2011 2012 2012 Motorcycles and relevant parts All-terrain vehicles (ATVs) and relevant parts Automobiles and relevant parts Financial, insurance services Power products and relevant parts...

  • Page 60
    ... information based on the location of the Company and its subsidiaries As of and for the year ended March 31, 2011 Yen (millions) North America Other Regions Reconciling Items Other Adjustments Japan Europe Asia Total Consolidated Net sales and other operating revenue: External customers...

  • Page 61
    ... U.S. dollars (millions) North America Other Regions Reconciling Items Other Adjustments Japan Europe Asia Total 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...

  • Page 62
    ..., net Finance subsidiaries-long-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...

  • Page 63
    ...: Increase (decrease) in short-term debt, net* Proceeds from long-term debt* Repayment 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 64
    ... 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 65
    Yen (millions) U.S. dollars (millions) 2006 2007 2008 2009 2010 2011 2012 2012 ¥ 9,907,996 ¥11,087,140 ¥12,002,834 ¥10,011,241 ¥ 8,579,...509 179,060 12,559 3,137 5,819 187,094 ¥ 117 113 ¥ 118 117 ¥ 100 114 ¥ 98 101 ¥ 93 93 ¥ 83 86 ¥ 82 79 Honda Motor Co., Ltd. 63

  • Page 66
    ...31, 2012 Q2 Q3 Q4 Net sales and other operating revenue Operating income Income before income taxes and equity in income of affiliates Net income attributable to Honda Motor Co., Ltd. Basic net income attributable to Honda Motor Co., Ltd. Tokyo Stock Exchange: (TSE) (in yen) High Low New York Stock...

  • Page 67
    Investor Relations Information Honda Motor Co., Ltd. 65

  • Page 68
    ... Motorcycles, Automobiles, Financial Services and Power Products and Others March 31 KPMG AZSA LLC Corporate Web Site: http://www.honda.co.jp IR Web Site Japanese: http://www.honda.co.jp/investors/ IR Web Site English: http://world.honda.com/investors/ Stock Information Securities Code Number of...

  • Page 69
    Major Shareholders Number of shares held (thousands) Percentage of total shares outstanding (%) Individual or Organization Japan Trustee Services Bank, Ltd. (Trust Account) The Master Trust Bank of Japan, Ltd. (Trust Account) Moxley & Co. Meiji Yasuda Life Insurance Company Tokio Marine & Nichido ...

  • Page 70
    ... Forest Stewardship Council® (FSC)-certified paper made of wood from responsibly managed forests. This annual report uses vegetable oil inks that include few volatile organic compounds. This annual report was printed using waterless printing, which releases no harmful materials. Printed in Japan