In the wake of a 63 percent third quarter profit drop due to dismal sales in North America and Europe, Honda Motor Co. has dropped its forecast for the fiscal year ending March 31 to $1.46 billion, down from $1.88 billion.

The new figure represents a decrease of 81.1 percent from last year, a situation that has Honda cutting capital and research and development costs to overcome a third quarter sales drop of 16.8 percent.

The dramatic decrease of the yen to the dollar and to the euro further damaged Honda's position, taking an addition $1 billion or more away from the company's third quarter income, worsening an economic picture that Executive Vice President Koichi Konda expected to continue into the first half of 2009. "We can only hope it improves in the second half," he said.

Operating profit for Honda in North America dropped 55.2 percent in the third fiscal quarter on a 13.5 percent sales drop to just 416,000 vehicles moved. Industry-wide, sales in the United States dropped 18 percent in 2008.

The announcement from Honda likely prefaces a series of grim earnings assessments from the Japanese carmakers, with Toyota expected to report an operating loss of as much as $4.17 billion later in the week.