Press Release: Honda Canada Finance Inc

Press Release: Honda Canada Finance Inc
Date of Release: Sep 6, 2002
Confirms at "A" & R-1 (middle)

Kam Hon, Walter Schroeder /  416-593-5577 ext.2243 / khon@dbrs.com

The R-1 (middle) and "A" ratings of Honda Canada Finance Inc., based on
the parent, Honda Motor Company Limited ("Honda" or "the Company"), are
all confirmed, with a Stable trend.  The ratings reflect an extremely
strong balance sheet with very good continuing operating performance.

 

Honda continues to be an efficient producer of cars, with quality levels
that are among the best in the industry.  Honda's finance company, which
finances and leases cars, is developing as a highly successful division,
providing stable income, with loss rates at very low levels.  Honda has
now raised auto sales to 2.666 million units, with the intent to raise
this to 3.4 million cars by 2004/2005.  This partly addresses a major
criticism that Honda lacks critical mass and size, and with the
economics of the automobile based on high volumes, Honda would have to
merge with a larger entity.  The Company's operating performance has
been excellent, but there are five limitations that influence the
rating:  (1) Honda is highly yen-sensitive, and the recent strengthening
of the yen would impact profitability.  (2) The Company is concentrated
in two regions, Japan and North America, where 84% of auto sales are
made.  Auto contributes over 80% of operating profit.  (3) Honda
continues to be weak in Europe which has yet to break even.  (4) Japan
is an intensely competitive auto market led by Toyota, which has over
40% market share and is a tough competitor.  (5) Honda still lacks a
broader pick-up truck product line.  These five limitations suggest that
the "A" and R-1 (middle) ratings are still appropriate, despite recent
strengthening of the Company's financial position.  

 

 

Dominion Bond Rating Service Limited (DBRS) will publish a full report
shortly that will provide additional analytical detail on this rating
action. If you are interested in receiving this report, please contact
us at: info@dbrs.com.

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