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The market expected the global recession to decimate Japanese automakers' profits, but few expected their second-half losses to be so huge. Now the question is whether whopping output and capital spending cuts will even allow them to break even next year.

Honda Motor (nyse: HMC - news - people ) looks on course to post an operating loss in the second half to the tune of at least 120.0 billion yen ($1.4 billion), on the severe demand slump and surge in the value of the yen. This would be the company's first half-year operating loss in over a decade. Japanese automakers are scrutinizing all their pipeline investments for possible delays or cancellation, slashing output and jobs, and looking to wrangle price cuts from steelmakers and other suppliers.

On Wednesday, Honda Motor slashed its full-year operating profit forecast by 67.0%, in the third such guidance cut this year. It estimates earnings for the year ending Mar. 31 to come in at 180.0 billion yen ($2.0 billion), down from a previous guidance of 550.0 billion yen ($6.2 billion). The forecast earnings represent a 81.0% plunge from last year. It also signifies a larger-than-expected loss in the second half since Honda posted a first-half operating profit of 302.9 billion yen ($3.4 billion).

"We see no sign of a recovery," Honda president Takeo Fukui said at a press conference. Honda's shares fell 108 yen ($1.22), or 5.5%, to 1,865 yen ($21.09) in Tokyo trading on Wednesday.

"The magnitude was quite a bit bigger than anyone was looking for," said Christopher Richter, Tokyo-based analyst for CLSA. "This does not bode very well for the next fiscal year." On Wednesday morning, the Nikkei reported that Honda would slash its guidance to 300 billion yen ($3.4 billion), which was already below Wall Street expectations. Instead, Honda predicted just over half that.

Honda said it expected sales to have fallen 13.0% for the year, because of a collapse in demand from the U.S. and Europe. The yen's surge to decade-highs against the dollar and euro has dealt a further devastating blow to Japanese exporters by eroding their overseas earnings. Honda said it would cut its dividend to 11 yen (12 cents) per share for the October-December period, down from 22 yen (25 cents).

"We're not expecting any of the makers to meet the forecasts they set after the first half," Richter said. "I don't think we're done with bad news for automakers."

Honda Motor Co. said Thursday it will further cut vehicle production in North America as it adjusts to plunging automobile demand.

Tokyo-based Honda is reducing production by another 119,000 vehicles for its fiscal year ending March 31, bringing expected production for the fiscal year to 1.3 million units.

Honda spokesman Ed Miller said the cuts will take place at five of Honda's seven plants in the U.S. and Canada. Employees at the plants will be given other tasks or can take paid or unpaid vacation time, he said. No layoffs will result from the cuts, he said.

Another Honda spokesman, Ron Lietzke, said production will be scaled back at the company's engine plant in Anna, Ohio, and its transmission plant in Russells Point, Ohio.

Honda, the second-largest Japanese automaker, has been hurt by the global auto industry downturn, a product of slowing economic growth and tight credit markets around the world. Earlier this month, the automaker said its U.S. sales fell 32 percent in November and 5 percent for the first 11 months of the year.

The company's latest production cuts come on top of previous reductions of 56,000 vehicles for North America announced earlier in the fiscal year. Last month, Honda said it was cutting production in Japan and Europe by 61,000 vehicles.

Miller said production will be cut by 18,000 vehicles at Honda's plant in Lincoln, Ala.; by 58,000 vehicles at its plants in Marysville and East Liberty, Ohio; by 37,000 vehicles at its operations in Alliston, Canada; and by 6,000 vehicles at its recently opened plant in Greensburg, Ind.

Lietzke said the cuts at the Ohio auto plants would be completed by March.

U.S.-traded shares of Honda fell $1.68, or 7.3 percent, to $21.32 in morning trading amid uncertainty over the fate of a federal rescue of the U.S. auto industry. The Senate failed to pass a proposed bailout package Thursday.