Honda says U.S. tariffs on Mexican imports would prompt operational rethink

By Naomi Tajitsu TOKYO (Reuters) - Japan's Honda Motor Co Ltd <7267.T> on Friday said it would need to rethink its operations in Mexico if the United States, its biggest market, raised tariffs on imports from the country as proposed by U.S. President Donald Trump. Honda is among global automakers under pressure from Trump to ensure more cars sold in the United States are made locally, to increase jobs and shrink that country's global trade deficit. Japan's third-biggest automaker said Trump's proposed 20 percent tariff on imports from Mexico could prompt a rethink of its presence there, where it operates two vehicle assembly plants. Last year, Honda made around 250,000 vehicles in Mexico, more than half of which were exported to the United States. "When it comes to Mexico, if there were a big jump in tariffs on U.S. imports, we would have to respond in some way," Executive Vice President Seiji Kuraishi told reporters at an earnings briefing. Trump has criticised automakers including Ford Motor Co , General Motors Co and Toyota Motor Corp <7203.T> for making cars sold in the United States outside the country. But Japanese makers have increasingly localised production over the past three decades, with Honda's U.S.-produced vehicles accounting for around one-quarter of its global output. "We've been investing in the United States for 40 years to develop and manufacture cars. We hope that Mr. Trump understands this," Kuraishi said. In 2016, Honda sold a record 1.64 million vehicles in the United States, roughly one-third of which were imported from Canada, Mexico, Japan and Britain. Around 70 percent of its vehicles produced in the United States are sold there. PROFIT FORECAST HIKE Earlier on Friday, Honda raised its net profit forecast for the year ending March for the second time, to 545.0 billion yen ($4.82 billion) - 58.2 percent over the year earlier. It also said it expects the local currency to average 107 yen to the U.S. dollar, compared with an earlier projection of 103 yen. Honda suffered warranty- and quality-related costs in the last business year due largely to massive recalls of potentially faulty air bags from supplier Takata Corp <7312.T>. But with those costs out of the way this year, and with the yen weakening since April, Honda expects a boost in performance. Booming sales of sport utility vehicles in China have also allowed Honda to nudge up its full-year sales outlook for Asia to 1.95 million vehicles. That helped it raise its global outlook marginally to 5.01 million vehicles. (Reporting by Naomi Tajitsu; Editing by Christopher Cushing)