Honda's chief executive said Thursday the dollar's recent plunge was sending the automaker into a "danger zone," threatening efforts to keep Japan's manufacturing strong.
President and Chief Executive Takanobu Ito also said Honda Motor Co. was planning a small electric car for the U.S. market as a way to clear California's strict emissions standards.
But he said Japan's No. 2 automaker was in no hurry to introduce the electric vehicle, and work on it had just begun. Honda, instead, plans to focus on hybrid technology, exemplified in its hit Insight hybrid, as the pillar of its green strategy for some time, Ito said at Honda's Tokyo headquarters.
Ito, 56, who took helm at Honda just three months ago, was energetic and optimistic about his company's ability to ride out tough times by forging ahead as an innovator.
But all he sounded were alarm bells when the topic turned to the yen's recent strength.
"It's tough," he told The Associated Press. "Even with the dollar at 90 yen, we are practically at the end of the line."
The dollar fell to a nine-month low near 88 yen earlier this week, although by Thursday it had recovered to above 90 yen. The earnings forecasts of some Japanese exporters assume the dollar will average about 95 yen. Honda's assumption for the current fiscal year is 91 yen.
A strong yen erodes the value of overseas earnings for Honda and other exporters, which have been struggling to stage a comeback after getting hammered last year by the financial crisis and credit crunch.
Comments by new Finance Minister Hirohisa Fujii, which were widely seen as favoring a strong yen, have been blamed for the dollar's sharp slide. Fujii has since tempered his comments.
Ito did not directly criticize Fujii, who took office last month, but warned that many Japanese are reliant on the auto industry for jobs _ directly and indirectly.
"We have been trying to figure out how to keep our operations going," he said. "This is a danger zone."
One way to escape the hammering from a strong yen is to move production to nations where the vehicles are sold. But that would also reduce manufacturing jobs in Japan.
Ito said Honda believes in keeping its domestic manufacturing base strong as the roots of its technology and engineering innovations.
Honda, with its longtime strength in smaller models reputed for mileage such as the Fit subcompact, has emerged from the global recession in better shape than bigger Japanese rival Toyota Motor Corp.
Toyota sank to its worst ever loss for the fiscal year ended March 31, and is forecasting even more red ink for the current fiscal year. Honda bucked the trend to stay in the black the previous fiscal year and is expecting to be profitable this year.
"Honda's strength lies in its ability to propose ideas," Ito said.
