Top Asian car makers Honda Motor <7267.T> and Hyundai Motor <005380.KS> painted vastly different portraits on Thursday, with Hyundai turning in a stellar quarterly performance while Honda struggled to overcome supply woes after Japan's devastating earthquake.

Japanese automakers have slashed production since the magnitude-9.0 earthquake on March 11 and have yet to determine when suppliers will fully recover, forcing them to delay issuing forecasts for the current year.

South Korea's Hyundai has been picking up the slack, helped by a popular line-up of new models which have been selling strongly in top markets China and the United States.

Its shares surged 7 percent to a record high after its results, taking gains for the year to date to 44 percent.

Hyundai has been emerging as an alternative to Japanese cars, shaking off its image as a maker of cheap cars, said Lee Dong-jin, a fund manager at KTB Asset Management. It's now seeing some benefits from increasing production at overseas plants while the world took a hit from the financial crisis.

Hyundai, ranked fifth by global sales in 2010 with its affiliate Kia Motors <000270.KS>, said its net profit rose 47 percent to 1.88 trillion Korean won ($1.7 billion) in January-March, compared with 1.28 trillion won a year ago.

Honda, hurt by supply chain disruptions as a result of the catastrophes in Japan, said its net profit for the January-March quarter fell 38 percent to 44.55 billion yen ($541.8 million). Operating profit fell 52 percent to 46.21 billion yen, compared with an average estimate of 103.1 billion yen from 15 analysts.

Japan's No.3 automaker said it would not provide an outlook for the new business year until at least mid-May as it struggles to measure the speed of recovery in the industry's complex supply chain.

A survey of 15 analysts forecast Honda's operating profit for the full year to March 2012 to fall 31 percent to 394 billion yen.

Hyundai was reporting earnings on a consolidated basis to reflect earnings of its affiliates including financial operations under new accounting rules, and there were no consensus guidelines for the result.

Hyundai outperformed its global peers in the last quarter thanks to popular models such as the Sonata mid-sized sedan and the Elantra compact in the United States, South Korea and other markets.

It said sales were especially good in the United States and China last quarter, rising by 28 percent and 30 percent respectively, while its global sales rose 10 percent from a year ago. Honda's global car sales fell 1.6 percent in the quarter.

The momentum is set to pick up in April-June as Hyundai and its Kia affiliate enjoy higher pricing, partly helped by the output cuts in Japan.

Before the earthquake, concerns lingered about price competition, but we can pretty much rule that out now, said Yoon Pil-joong, an analyst at Samsung Securities.

Hyundai and Kia are targeting combined sales of 6.33 million vehicles this year, which could be on par with Toyota's sales, which analysts forecast at 6.3 million to 7 million.

KOREA COULD OVERTAKE JAPAN LEAD

While the supply bottleneck of certain specialty parts such as microcontroller units made by Renesas Electronics Corp <6723.T> has also hit some automakers outside Japan, most of the pain is being inflicted on domestic brands such as Honda, where output remains at half the level planned before the quake.

Honda and Toyota Motor <7203.T> have forecast a return to normal production by the end of 2011, but said they do not know how quickly volumes will pick up. The slump in auto production accounted for about half the record 15.3 percent fall in Japanese factory output in March, the government said.

The earthquake has not only splintered the industry's supply chain, but has forced a delay in vehicle launches.

Honda had been scheduled to begin selling a new hybrid station wagon based on the popular Fit subcompact in Japan a week after the quake, while Toyota has also postponed the launch of wagon and minivan versions of the Prius.

But an even bigger worry is what the shortage of Japanese cars and the long wait for consumers would do to their market share in key regions such as the United States and China as some car buyers opt to shop at competing brands, one analyst said.

Frankly, right now there's no way to know how this will play out in the medium to longer term, said Takaki Nakanishi, an auto analyst at Merrill Lynch Japan Securities.

While supply is tight through the summer, some sales will shift to other brands such as Hyundai. We'll only start to get a sense of whether this trend is temporary or not toward the end of the year.

A Honda executive conceded that the unprecedented supply disruption comes at an unfortunate time for the company, which just remodeled its Civic and had been counting on the popular model to drive a strong sales growth this year.

We only have 40-some days of (vehicle) inventory in North America, so in about a month these will run out, Chief Financial Officer Fumihiko Ike told a news conference.

In that sense, the impact on sales volumes will be quite big and first-quarter results are going to be very tough.

($1 = 81.515 Japanese Yen)

($1 = 1083.000 Korean Won)

(Additional reporting by Ju-min Park and Yerim Kim; Editing by Matthew Driskill)

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