TOKYO - HONDA Motor Co on Wednesday slashed its profit forecast by more than half for this year, its third cut as the global economic crisis takes a heavier toll on the auto industry.

Fellow Japanese automaker Nissan Motor Co also continued to feel the pinch from the economic downturn, announcing it would further curb production and cut another 500 jobs.

'The global automobile market is rapidly shrinking,' Honda president Takeo Fukui warned at a news conference.

Japan's second largest automaker said it now expects a net profit of 185 billion yen (S$3 billion) for the year to March, sharply down from its earlier forecast of a 485 billion yen net profit.

Honda earlier this month announced a shock pullout from Formula One, saying it could not stay in the prestigious racing tournament due to the dire state of the global economy.

It has said it is freezing more projects, including the planned release in Japan in 2010 of its luxury Acura model which was a hot seller in North America when the market there was strong.

Honda, a pioneer of environmentally friendly cars, said on Wednesday it was suspending the opening of a new research and development facility and two new plants. All three were supposed to open in 2010 across Japan.

It also put on hold plans to start production in Turkey next year and in India the year after. The company's board members each cut their salaries by 10 per cent.

Honda shares tumbled 4.2 per cent to 1,891 yen ahead of the profits announcement, despite gains on Tokyo's benchmark Nikkei index.

Yasuaki Iwamoto, an auto analyst at Okasan Securities, said Honda's revision was even more severe than expected.

'The auto market is in an unprecedented situation which it could not have imagined even a few months ago,' he said.

In the United States, the Big Three automakers - General Motors, Ford and Chrysler - are on the verge of collapse.

Japanese automakers fear they will become less competitive due to a soaring yen, which on Wednesday rose to a 13-year high against the dollar.

While the stronger yen is a serious factor, 'the real problem for automakers is that they are now suffering a sharp decline in sales, which are of course the pillar of their earnings,' Mr Iwamoto said.

'People used to say that a slump in developed countries can be covered by earnings in developing countries. But that scenario has completely collapsed.

No regions can now expect gains in sales,' he said.

Honda no longer expects to meet its goal of selling a symbolic figure of four million cars around the world in the year to March 2009.

It now expects to sell 3.65 million cars, a slump of 275,000 from the previous financial year. In North America, sales are expected to tumble by 14.1 per cent.

Nissan, Japan's third largest automaker, said separately that it would reduce output by 78,000 cars this financial year, eliminating 500 temporary-contract jobs.

With the cuts, Nissan in Japan will no longer have any contract workers, who have borne the brunt of the growing number of job cuts in the country. -- AFP