Honda outlines global plan focusing on Asia

Honda outlines global plan focusing on Asia

Ryan Nakashima, Agence France-Presse, Tokyo

Honda Motor Co. Wednesday unveiled plans to shift car part production out of Japan and import large numbers of vehicles into Japan from foreign factories to cut costs and boost its global competitiveness.

The move to cut costs and move production overseas came despite a forecast that the number three Japanese automaker's domestic vehicle sales would rise seven percent in 2002 to 920,000 from an expected 860,000 in the current year.

Honda also expects to sell 1.22 million vehicles in the United States next year.

In contrast, Japan's top automaker Toyota Motor Corp. said Wednesday it expected domestic sales to rise just two percent to 1.75 million vehicles next year and overseas sales to rise one percent to 3.55 million.

Honda said it would increasingly rely on other countries in Asia for spare parts.

"We have decided to make the Asian region a key supply station in our global supply network for parts," Hiroyuki Yoshino, president and chief executive, told a news conference.

Goldman Sachs analyst Kunihiko Shiohara gave the plan a thumbs up.

"They may not be able to turn a profit if they only make parts in developed countries, so deciding to go forward positively and utilize Asia is totally reasonable."

The company also announced it would begin importing small passenger cars to Japan from a plant in Thailand starting in 2003, marking the first time a Japanese automaker has imported cars on a large scale for domestic sale.

The model has yet to be decided, said spokesman Makoto Nagatsuyu, but it would be a small car and would not be one of the four models currently produced there, the Accord, Civic, City and CR-V.

Plans were going ahead to boost Honda's production in China to 120,000 vehicles from 50,000 by March 2003 at a cost of over 10 billion yen (US$78 million).

The plant, which already rolls out Accord vehicles, will begin producing the Odyssey model next northern hemisphere spring.

"I know the Chinese market will continue to grow," said Yoshino. "As the global economy slumps, I think this area is the least vulnerable to that slowdown."

Analysts were skeptical about the sales projections given by the two automakers.

"These companies are in the lap of the gods in terms of the external environment," said ING Barings automobile analyst Howard Smith. "It's particularly difficult to predict what the U.S. is going to do next year. That's the big key."

Goldman Sachs' Shiohara agreed. "I think the global market for cars next year is going to be really weak, so I think it will be really difficult for these companies to achieve their sales targets."

Honda expects to boost production both within Japan and overseas, while Toyota expects to cut production at home and raise output overseas.

Honda expected to boost domestic production next year by 2.7 percent to 1.31 million vehicles and overseas output by 14.3 percent to 1.57 million units.

Toyota said it would scale back domestic output by four percent next year to 3.2 million vehicles, but boost it overseas by 16 percent to 2.07 million.