(Recasts, adds forecast revision, background)
By Chang-Ran Kim, Asia auto correspondent
TOKYO, Oct 28 (Reuters) - Japan's Honda Motor Co posted a surprise fall in quarterly operating profit on Tuesday despite snappy sales in the key U.S. market and it slashed full-year projections due to the dollar's slide against the yen.
The 3.3 percent downward revision in operating profit comes just three months after Japan's No.2 auto maker raised its forecasts for the 2003/04 business year, and it could signal similar warnings by its Japanese rivals over the next few weeks.
Two weeks ago, Nissan Motor Co left full-year forecasts unchanged, citing better than expected U.S. sales in first six months and new U.S. production capacity.
But analysts noted that Honda's plants were running at full capacity and that increased production from the expansion of its Alabama plant would take effect only in mid-2004, after it closes its books for the year on March 31.
Honda now expects group operating profit of 623 billion yen ($5.75 billion) for 2003/04 compared with the previous forecast of 644 billion yen and 689.4 billion booked last year.
Net profit is seen rising 10 percent to 470 billion yen instead of 451 billion.
Honda's operating profit in the July-September second quarter was 151.69 billion yen, down 0.9 percent from the same period last year. Net profit grew 58 percent to 137.36 billion yen as sales expanded 5.2 percent to 2.017 trillion yen.
Second-quarter operating profit was especially weak, considering the year-ago figure was weighed down by off-one warranty costs for transmission defects.
Honda said continued strength in the United States -- which accounts for about four-fifths of Honda's profits -- was not enough to make up for a 20 percent slide in domestic sales and a rise in research and development costs.
JAPAN WEAK
Dismal sales in Japan so far this year forced Honda to cut its sales target in its home market for 2003/04 to 765,000 units from 815,000, representing a 10 percent fall on the year.
That put its global sales forecast for the year at 3.035 million instead of 3.065 million.
With Nissan's worldwide sales forecast at 3.04 million this year, Honda would lose its position as Japan's second-largest car maker at those numbers.
Analysts said earnings for the October-March second half would likely come under pressure from a stronger yen and a slowdown in U.S. sales.
But in Japan, where sales have been falling by double-digit percentages almost every month this year, Honda is expected to rebound in the second half thanks to the recent launch the Life minicar and Odyssey minivan.
Honda also plans to enter the large minivan segment next spring with the "ASM" eight-seater currently being displayed at the Tokyo Motor Show.
Honda changed its assumption for the dollar rate for this year to 115 yen from 117 yen, and the euro to 127 yen from 126 yen. The dollar was trading at three-year lows around 108 yen, and the euro at just below 127 yen on Tuesday.
Honda's shares fell 1.8 percent during the July-September quarter, underperforming a six percent rise in the Tokyo stock market's transport sector index and a 29 percent jump in the TOPIX index of all main board shares.
On Tuesday, Honda's stock ended down 1.4 percent at 4,270 yen before the announcement, compared with a 1.2 percent rise in the TOPIX. ($1=108.43 yen)