While several automakers are looking at declining sales in the face of the current economic downturn and record oil prices, Honda Motor Co., Japan's second-largest automobiles manufacturer, has unexpectedly benefited from the prevailing conditions which have spurred demand for its fuel-efficient Fit and Civic cars.

Consequently, it today announced an 8.1 per cent jump in quarterly profit. The results came a day after US automaker Ford Motor Co. reported its worst quarterly loss ever. (See: Ford announces $8.7-billion quarterly loss, goes for major restructuring)

GM, which lost $3.3 billion in the first quarter, is closing four North American assembly plants, cutting thousands of jobs, selling assets and suspending its dividend in an effort to raise cash. (See: GM to cut thousands of jobs, save $15 billion under new restructuring plan)

Net income totaled 179.6 billion yen ($1.7 billion), or 98.98 yen a share for the three months ended 30 June, compared with 166.1 billion yen, or 91.38, a year earlier, the company said in a release today.

Higher raw-materials costs will trim annual operating profit by 199 billion yen, more than double the company's initial estimate of 74 billion yen, Executive Vice President Koichi Kondo said at a press conference in Tokyo.

The company will build 50,000 fewer Pilot and other light trucks than initially planned in North America, Kondo said. In contrast, it will boost production of Civics by 20,000 units in North America.

Sales in Asia outside of Japan and China grew 18 per cent to 221,000 vehicles. In North America, sales dropped 1.1 per cent in the quarter to 460,000. Domestic sales slumped 5.9 per cent.

In geographic terms, revenue from North America, its largest region, fell 5.7 per cent, while Europe declined 8.9 per cent, and Japan revenue slipped 2.3 per cent. But it grew 8.9 per cent in the rest of Asia and 29.8 per cent in the rest of the world.

Honda said that apart from increased unit sales, reduced sales incentives on cars sold in North America and cost controls helped overcome the negative impact of higher raw material costs, as well as general and administrative expenses.

Operating profit dropped 0.2 percent to 221.3 billion yen, Honda said. A stronger yen cut the carmaker's operating profit by 81.3 billion yen. The company reduced spending on research and development by 3.1 percent in the period, boosting profit by 4.3 billion yen.

Earnings were ''higher than expected'' because the company hasn't set aside US incentives of about 30 billion yen last quarter, Kondo said. Honda will book the cost in the second quarter, he said.

The company maintained its net income forecast for the year ending 31 March 2009 at 490 billion yen, reflecting an 18.3 per cent decline in profit from the previous year.
The company expects to sell 4.08 million automobiles and 10.46 million motorcycles during the full financial year.

Honda's board of directors recommended a quarterly dividend of 22 yen a share. Full year dividend is expected at 88 yen a share. The company based its earnings on exchange rates of 105 yen to the dollar and 164 yen per euro, compared with 121 yen and 162 yen a year earlier.

Honda is the first of Japan's three biggest automakers to report earnings. Nissan Motor Co., the country's third largest, will release earnings on 1 August. Toyota Motor Corp., Japan's biggest, will follow six days later.