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  TOV News > Latest inverview with Mr. Ito, Honda's CEO > > Re: Lehman shock

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DrWhiner
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Lehman shock [View News Item]    (Score: 1, Normal) 07-05-2013 21:10
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I think many here just couldn't understand the Full impact of Lehman shock to a Japanese automaker:

1. economics [pretty much everybody gets it I guess]:

market crashed, sales fell by about a third (in general car plants were operating below the break even point i.e. they are losing money, like what is happening to the non-premium European automakers now)

2. credit market dried up;

3. yen appreciated against USD and all other major currencies while Korean won depreciated.

Not many here grasp the impact of currency fully.

P.S. Hey many here would say how about VW and BMW?

Take a look at euro vs. USD, euro vs. JPY and euro vs. RMB.

integrator
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Re: Lehman shock [View News Item]    (Score: 1, Normal) 07-05-2013 21:42
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Some do, some don't. Many do.

What most don't understand is where Honda has spent all its cash reserves prior to the Lehmann crisis, that put them in such a vulnerable position. It was more dire than many automakers and more dire than Honda would publicly admit.

Ponyboy
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Re: Lehman shock [View News Item]    (Score: 1, Normal) 07-05-2013 23:55
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Lack of sales due to the economic crisis put Honda in a vulnerable position. Honda spent it's cash reserves in dividends, paying off current and long term debt, and maintaining shareholder's equity. This is what gave Honda a P/E ratio of 27.8 in 2010 vs. an industry average of -133.1.

Consider that they had a negative cash flow of -749 million yen in 2009 and lost over 1.1 billion yen in investments during the same year. And still eeked out a profitable year.

The vast majority of Honda investors are institutional and rely on strong dividend and stable stocks. Protect the stock price, protect your market capitalization position, protect your debt triggers.

If not for some of these fiscal moves, honda could have been a subsidiary of toyota or...the company that's buying everyone: vw. Dire indeed.

integrator
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Re: Lehman shock [View News Item]    (Score: 1, Normal) 07-06-2013 09:15
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Agreed particularly with the last statement. However, those were reactionary moves to protect stock price. It doesnt include Honda Corporate's pre-2008 sudden expansion and R&D investment in largely unviable technology.... all focused on Ito's apocalyptic vision of the auto industry. It was expensive, added nothing to their automobile sales pre'08 ... even then, the hybrid program was failing... but sales drops in 08, 09.... thru '11 just made that apparent - and they had little new to show that would attract recovering buyers. I honestly believe the gen 8 Civic and CRV (particularly from US sales) is what kept the lights on. This is also the period when Mendel was given control over US product development, because Ito largely didnt care about anything except 'green-cars'. So we started seeing all these stagnant product choices and poorer capability.
Ponyboy
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Re: Lehman shock [View News Item]    (Score: 1, Normal) 07-06-2013 10:28
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Couple things:

- Ito didn't ascend to Honda presidency until '09.
- Sales were steadily increasing in '07 and '08 and varied through '09-'13 but with almost double the profitability in '11.
- R&D stayed around $5 billion US from '07 to '09.

Re: the pre-2008 expansion: are you talking about the increase in plant, property, and equipment?


Potenza
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Re: Lehman shock [View News Item]    (Score: 1, Normal) 07-06-2013 10:35
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integrator wrote:
Some do, some don't. Many do.

What most don't understand is where Honda has spent all its cash reserves prior to the Lehmann crisis, that put them in such a vulnerable position. It was more dire than many automakers and more dire than Honda would publicly admit.

I don't think Honda's situation was more dire, I think they just acted more drastically. And ultimately, as another poster pointed out, that meant they were still posting a profit when almost no one else was.

Also I disagree on your statement regarding what they would "publicly admit." Frankly I've heard the phrase "Lehman shock" and "financial crisis" and such far more from Honda than anyone else. It seems they are very clear about the time period, the cause, and the effects. So clear, in fact, that they are telling us about projects that were cancelled - V8, RWD - when they could "save face" and just deny that those were anything more than rumors.

I think the whole picture is very clear now - from Fukui to Ito, from economic downturn to present - and I feel that Honda has weathered it well and put themselves in a great position.

integrator
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Re: Lehman shock [View News Item]    (Score: 1, Normal) 07-06-2013 16:58
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@ ponyboy - read the other thread for Ito's involvement pre'09.
Ponyboy
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Re: Lehman shock [View News Item]    (Score: 1, Normal) 07-08-2013 10:44
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Thanks integrator. I'm in the other thread too. I just have a hard time believing that someone other than the CEO or President, even a divisional or department head, can unilaterally and drastically revise company strategy.

 
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