Honda CEO: no plans for more North American expansion

By From Automotive News| May 28 2007
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Despite steady sales gains, Honda Motor Co. has no immediate plans to expand North American output beyond opening a factory in Indiana, in 2008, CEO Takeo Fukui said today.

"There is plenty of room to expand in Indiana, but we will look at the market before deciding to expand," Fukui said in remarks to journalists after a meeting with Indiana government officials here.

"Gas prices are high, but the American new-car and truck market will grow further in the future," Fukui said. "The current economic climate is having no impact on anything we are doing."

U.S. auto sales are down 3 percent this year, weaker than Honda executives forecast at the beginning of the year. The housing slump, record gasoline prices and slower economic growth are dampening consumer demand.

At the same time, higher raw material and product development costs have put a crimp on Honda's profits.

Honda's U.S. sales are up 1.6 percent, with car demand off 2.4 percent and light-truck sales up 7.1 percent. Helped by the Civic and Fit and the introduction of a redesigned Accord this fall, the automaker still expects its 2007 U.S. sales to rise 3.4 percent to 1.56 million units.

Fukui met with Indiana Gov. Mitch Daniels today and will attend the Indianapolis 500 on Sunday. Honda is supplying engines to the entire 33-car field.

The Japanese automaker is building a $550 million assembly plant on a 1,700-acre site in Greensburg, Ind., that will begin producing up to 200,000 Honda Civic sedans annually in fall 2008. Fukui toured the site today and received an update on construction.

Fukui said Honda is confident the United States can absorb another 200,000 units of capacity. While Detroit automakers are retrenching, Asia automakers are expanding across North America. Kia Motors Ltd. and Toyota Motor Corp. also are building new U.S. assembly plants.

Output at Honda's Lincoln, Ala., plant also has reached full capacity after a recent model changeover.

Honda will ship engines from a plant in Anna, Ohio, to the Greensburg site. And Fukui said it is likely that transmissions from Honda's Russells Point, Ohio, plant will be shipped to the Greensburg factory.

"We are dedicated to building and sourcing parts locally," he said.

Because a majority of Honda's suppliers already are in Ohio, Michigan, Kentucky and Indiana, the Greensburg plant is not expected to generate a significant number of additional auto parts plants in the region.

When the Indiana plant is operating, Honda will be able to build the Civic at three plants in North America.

Fukui also said:

Honda continues to believe there is a global demand for a small, inexpensive car for India and other markets. "We are currently looking at developing something smaller than the Fit," he said.

Honda is satisfied with the Ridgeline pickup. "It takes time to build public awareness that Honda has a pickup," Fukui said. "In the future, fuel economy will become more important to light-truck buyers, and we intend to meet those needs, initially with diesel options."

A year ago Honda announced plans to market a diesel-powered vehicle in North America in 2009 but gave no specifics.

Honda has no plans to abandon its Indy Racing League program, but it would like to see more engine suppliers compete in the open-wheel racing circuit. Since Toyota, Nissan Motor Co. and General Motors withdrew from the open-wheel series in recent years, Honda has been the only supplier of engines.

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