Honda Motor Co <7267.T> withdrew its annual earnings guidance in an unusual move on Monday due to uncertainty surrounding currency markets and Thailand's floods just as it was starting to recover from the March earthquake and tsunami.

Among Japanese automakers, Honda has been hit the hardest by both disasters this year, recovering slowly from the supply disruption in northeast Japan and suffering direct damage at its Thai car factory in the Ayutthaya industrial estate.

The maker of the popular Civic and Accord models had been preparing to ramp up overall car production to 125 percent of pre-quake plans in the October-March second half to build up inventory that had fallen after the March 11 disasters at home.

Even before the floods, the dearth of cars had sunk Honda's sales in the United States, its biggest market, ranking it below Nissan Motor Co <7201.T> in the last three months.

To put it bluntly, we're in a really tough spot, said Fumihiko Ike, Honda's chief financial officer. We're in a much more difficult position because our car factory is inundated.

Honda, the only automaker in Thailand with a flooded factory, builds about 5 percent of its cars there, with more than a third of the vehicles bound for export.

Like Toyota Motor Corp <7203.T> and Nissan, Honda also uses Thai-made components in other markets, meaning output reductions elsewhere in Southeast Asia, Japan and eventually the United States are also expected as supply runs out, Ike said.

Japan's third-biggest automaker also withdrew its forecast for its annual global car sales amid an indefinite suspension of work in Thailand, and uncertainty over how much its other already-stretched factories can fill the hole. It had previously forecast sales of 3.512 million vehicles in the business year to March 2012.

About one-tenth, or 35 of Honda's tier-one suppliers for cars in Thailand, had been flooded, Ike said. With the damage spreading, more suppliers down the chain could also become affected, he said.

The situation is changing daily. It's hard to get a read on the situation.

MONTHS OF PAIN AHEAD

Ike said operators of Ayutthaya's industrial estate had told Honda that it expects removal of the floodwaters to take until mid-December. Restoring work at the damaged facility would probably take a few months from there, meaning work could be halted through the end of the business year, Ike said.

The extent of the flood damage is a concern and will probably weigh on Honda's shares, said Yoshihiro Okumura, general manager at Chibagin Asset Management.

But I think in the medium term, the shares will be seen as being at the bottom and investors will gradually begin to look ahead to next year's earnings, he added.

Honda's shares have lost 22 percent so far this year, underperforming falls of 18 percent and 6.5 percent at Toyota and Nissan, respectively.

Japanese automakers have also been drowning in currency-related losses with the dollar well below their assumptions of an 80 yen average this business year. The Bank of Japan's intervention on Monday pushed the dollar to a three-month high, but few saw it as anything more than a brief respite.

Frankly, my reaction was: finally, they intervened. But I'm also aware that a solo intervention has a limited impact, Ike said. Will we able to keep these levels? I'm not all that hopeful, he said as the dollar hovered around 79 yen, against a record low 75.31 yen hit earlier on Monday.

The dollar was back below 78 yen late in Tokyo.

For the July-September second quarter, Honda posted a 68 percent drop in operating profit to 52.5 billion yen ($693 million) due mainly to a 14 percent plunge in car sales from a shortage of microchip controllers from Renesas Electronics Corp <6723.T>. That was worse than a consensus estimate of 63.5 billion yen from a Reuters survey of 13 analysts.

Net profit, which includes earnings made in China, fell 55.5 percent to 60.43 billion yen, also hammered by an 8-yen drop in the dollar from the year before. Second-quarter revenues fell 16 percent to 1.9 trillion yen.

While supply issues are set to drag on into 2012, Honda also faces tougher competition from a fast-growing Hyundai Motor Co <005380.KS> and Nissan, especially after its core Civic sedan got panned by influential U.S. consumer watchdog Consumer Reports.

Before the results were announced, Honda shares closed down 3.7 percent on a newspaper report that a recovery from the Thai floods could take six months. The benchmark Nikkei average <.N225> settled 0.7 percent lower.

The stock market's move today was shocking, in that the currency intervention pushed up the dollar and the euro against the yen, helping ease one of the worries on investors' minds, said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

But the Nikkei was still unable to hold any gains, showing that investors are not confident that the yen will remain down.

Nissan will report second-quarter earnings on Wednesday and Toyota on November 8.

($1 = 75.760 Japanese yen)

(Additional reporting by Hirotoshi Sugiyama and Lisa Twaronite; Editing by Matt Driskill and Michael Watson)

Thailand Earthquake China Japan