Honda to cut India car production

The Wall Street Journal (New Delhi) - Honda Motor Co. will cut car production from May at its factory in northern India as some of its parts suppliers in Japan are yet to fully resume operations after the March 11 earthquake and tsunami forced them to close facilities.

Honda's India unit sources some engine and electronic parts from Japan, Jnaneswar Sen, vice president of marketing at Honda Siel Cars India Ltd., said Tuesday.

"We are still assessing the kind of impact the quake in Japan will have [on our production], but our output will be impacted in May," Mr. Sen said.

A magnitude 9.0 quake struck Japan last month, which also triggered a tsunami, forced a halt in production at all car makers in the country and created shortages of parts from suppliers in the quake-stricken areas.

Mr. Sen said Honda Siel is still trying to minimize the impact on its production by sourcing auto parts from other vendors of Honda. Honda Siel buys most of its imported auto parts from Thailand.

Honda Siel, 99.9%-owned by Honda Motor and 0.1% by India's Siel Ltd., makes the Jazz hatchback as well as the City, Civic and Accord sedans at its plant at Greater Noida. The factory has an installed capacity to make 100,000 cars a year, or about 8,300 cars a month, but currently makes about 5,000 cars per month. It also imports the CR-V sport-utility vehicle.

The company also has another factory at Alwar in northwestern Rajasthan state where it makes engine components such as connecting rods and crank shafts for the Jazz and City models.

The quake in Japan is also expected to affect vehicle production in India as the local units of several Japanese auto makers, including Suzuki Motor Corp., Toyota Motor Co. and Nissan Motor Co., purchase critical auto parts from the east Asian country.

Honda's India unit is, however, the first Japanese company to announce an impact from the quake.

Maruti Suzuki India Ltd.'s Chairman R.C. Bhargava said Monday that the situation in Japan was yet to impact the company's production as it has sufficient stock to continue making vehicles, while Toyota Kirloskar Motor Pvt. Ltd. has so-far said it is still assessing the impact, if any.

Honda had last week said it will resume vehicle assembly at its two plants in Saitama Prefecture, near Tokyo, and Mie Prefecture in western Japan from April 11.

The company also said it will resume producing parts in Japan for its overseas operations from April 4. But it will restart operations at about 50% of its original production plan as supply of parts remains unstable, it had said.

All Honda factories in Japan will be operational by April 11, it had said. Production at Honda's Japanese factories fell 15.6% from a year earlier in February to 70,346 vehicles.

Separately, Mr. Sen said Honda Siel will raise the prices of all its vehicles between 1,500 rupees and 47,000 rupees ($1061) from Wednesday to partly offset the impact of higher input costs such as steel, aluminum and natural rubber.

"The raw material costs have risen sharply and we have to pass on some of this impact to customers," he said.