Honda Canada Inc.: Confirms at R-1 (middle)

Kam Hon / Walter Schroeder

(416) 593-5577 x243

e-mail: khon@dbrs.com

The commercial paper rating of Honda Canada Inc., based on the rating support from the ultimate parent, Honda Motor Co., Ltd. ("Honda" or the "Company") of Japan, is confirmed at R-1 (middle) with a Stable trend. Honda Canada Inc. is supported by a Support Agreement from Honda. The confirmation reflects the Company’s strong debt protection measures, above average profitability and its strong franchise in motorcycles and autos.

The strong yen has severely impacted earnings in fiscal 2000 (year ended March 31) leading to a near 14% decline in net income despite stronger volume shipment in all of its businesses and benefits from cost reduction. Going forward, competition is expected to intensify as a result of industry consolidation creating bigger and stronger competitors. Furthermore, the strong yen will continue to depress earnings. Honda has forecasted a 28% decline in net income in fiscal 2001. Nevertheless, Honda remains an industry leader in technology, with a strong franchise in both autos and motorcycles. It also has a strong balance sheet, with the capacity to finance future capital expenditure internally. The adoption of new manufacturing techniques to enable production of low volume models on the same assembly plant is an important consideration for the Company, as it will enable Honda to overcome the problem of size and critical mass.