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Honda (HMC) to Stop Auto Production in Argentina From 2020

Zacks Equity Research

Honda Motor Co., Ltd. HMC is set to stop automobile production in Argentina in 2020, per Reuters. This move is part of its plan of reorganizing automobile production across the globe and has no relation with the primary election results in the Latin American country.

The Japan-based auto giant began motorcycle production in Argentina in 2006 and started automobile production in 2011. From next year, the Campana plant in the province of Buenos Aires will solely concentrate on motorcycle production and will stop producing the HR-V auto model.

Honda is a leading manufacturer of automobiles and the largest producer of motorcycles in the world. In the first quarter of fiscal 2020, the company reported operating profit of ¥252.4 billion, down 15.7% from the year-ago period. The decline in operating profit can be attributed to high selling, general and administrative expenses, adverse impacts of foreign currency, and decreased sales revenues. These negative factors were partly offset by continuous cost-reduction efforts.

Honda Argentina employs 1,000 people. The company is trying to offer buyouts for the employees engaged in automobile production.

Honda generates the majority of revenues in the automobile division from the markets in North America and Japan. Countries in Asia — including China, India, Indonesia, Korea, Malaysia, Pakistan, the Philippines, Singapore, Taiwan, Thailand and Vietnam remain major contributors to revenues for the motorcycle segment.

Currently, Honda has an expected long-term growth rate of 6.9%.

Some important stocks in the auto space are Fox Factory Holding Corp FOXF, CarMax, Inc. KMX and Gentex Corporation GNTX. These companies have expected long-term growth rates of 16.7%, 12.6% and 5%, respectively.

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