Global Insight Perspective | |
Significance | Honda's expansion in the United States continues apace, echoing Toyota's rise in the region, but in stark contrast to the downsizing currently being experienced at GM and Ford. |
Implications | Honda was the first Japanese manufacturer to build a plant in the United States in 1982, and after enduring some lean years in the 1990s, it is back on track to grow further in the region with its winning model line-up and legendary quality. |
Outlook | Honda plans to manufacture passenger cars at the plant, and is also planning to produce clean diesel engines in Canada for the U.S. market, as part of the expansion programme announced earlier this year, giving a clear indication of where Honda fees it can exploit best the U.S. market in the future. |
Greensburg Gets the Green Light
Honda has picked the Indiana town of Greensburg for its sixth North American assembly plant. The investment is worth US$400 million and will result in a passenger-car plant with capacity for 200,000 a year and employing around 1,500 workers.
Honda will host a news conference in the town, 50 miles south-east of Indianapolis, this morning confirming the town as its preferred location. Greenburg had been mooted as a potential site for some time, but also in the running was Ohio, near its existing facilities.
U.S. Production to Reach 1.6 mil by 2008
Honda is expected to manufacture the Fit (Jazz) subcompact in Greensburg and potentially run a new Civic line as well, which is already made in Ohio. The decision comes after much speculation and some fierce lobbying by competing states for the plant, which the company said would employ 1,500 workers and produce 200,000 vehicles a year. The plant is expected to start producing vehicles by 2008 and will expand Honda's North American assembly plants from five to six. Honda has two other factories in North America making engines and parts. The Greensburg plant will increase annual production capacity from the current level of 1.4 million to 1.6 million vehicles by 2008.
Outlook and Implications
Honda was the first Japanese manufacturer to start vehicle production in the United States at its assembly plant in Marysville, Ohio in 1982, where it began assembling the Honda Accord, which rapidly became the U.S. best selling passenger car in the late 1980s and early 1990s. It currently owns eight production plants in the United States and employs 13,000 workers, or "associates" in Honda parlance. The latest expansion efforts will bring Honda's total capacity in the United States to 1.5 million units by fiscal year (FY) 2007, rising to 1.6 million in 2008. U.S. production now plays a major role in the global Honda supply network.
The company plans to invest a further US$170 million to expand production of precision gears at the Ohio plant and engine components in Alabama. In late 2004, Honda announced that it would build a US$100 million automatic transmission facility at its plant in Tallapoosa, Georgia. This facility supports the assembly plant in Lincoln, Alabama. Construction of the facility started in May 2005. This plant is part of Honda's plan to invest ¥30 billion to localise vehicle and engine production in North America.
Honda's expansion plans mirror those of Toyota as both companies become major players in the region, but is in stark contrast to the downsizing of General Motors (GM) and Ford. The plan for the Greensburg facility to make subcompact cars also highlights where Honda sees growth in the U.S. market and again polarises the company when compared to the U.S. carmakers. The U.S. automakers have long looked at Japan's U.S. factories with envy over productivity and quality issues, yet there are no secrets to their manufacturing successes any more. Despite this, the U.S. companies have been unable to implement similar strategies over the decades that may have helped them to avoid the worst of this current cycle.
Honda suffered badly in the recession of the early 1990s, cutting production and jobs in its Japanese and U.S. facilities as the rise of the sports-utility vehicle (SUV) caught it off guard. However, in this ever-cyclical industry, external factors are driving consumers to different vehicles again, and Honda looks well equipped to benefit from the shift.