Honda Setting Aside Another $363M for Recall

Additional spending on air bag recall will cause Honda to restate its financial results for the last fiscal year.
Matthew HellerJune 12, 2015

Honda Motor is taking another hit from a growing recall of air bags, saying Friday it is setting aside another $363 million to pay for recall costs.

The additional spending will be booked for the year that ended on March 31, rather than during the current year. Under U.S. accounting rules, it would be considered something that should have been foreseen and provisioned for during the last business year, a Honda spokesman said.

In late April, Honda reported an operating profit of 651.7 billion yen for fiscal 2015 , down 13% from the previous year. Revised earnings figures will be disclosed at the end of this month, the company said.

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Honda’s accounting move follows the decision of air bag supplier Takata Corp. last month to double the size of the air bag inflator recall to a record 33.8 million. Honda, Takata’s largest customer, has so far recalled about 20 million inflators worldwide.

The U.S. National Highway Traffic Safety Administration had ordered Takata to declare more inflators defective last November. The inflators can explode with too much force, sending metal shrapnel into a car’s passenger compartment. So far the problem has been linked to at least six deaths, all in cars made by Honda, Reuters reports.

After Honda announced the financial restatement, its shares fell about 2% to close at $33.17 Friday. The company said the revised results would not its dividend payout for fiscal 2015 or the forecast for its current fiscal year.