May 16, 2006

US states, Ontario jostle to host new Honda plant

By Kevin Krolicki

NEW YORK (Reuters) - Honda Motor Co.'s urgent need for a
sixth assembly plant in North America has sent local
governments scrambling to woo the Japanese automaker and the
jobs it would bring to town.

Representatives from Indiana and Ohio on Tuesday both said
they have been in negotiations with Honda about its plans for
the plant to meet the growing demand for its cars.

Alabama and the Canadian province of Ontario were also
expected to be on Honda's short-list, as the automaker prepared
to announce a winner as soon as Wednesday.

The Japanese business daily Nihon Keizai reported earlier
on Tuesday that Honda would invest over $450 million to build a
plant that would go into production in 2009 and meet growing
demand for its cars, including the compact Civic and the
recently introduced Fit subcompact.

Honda President and Chief Executive Takeo Fukui is
scheduled to hold a news conference on Wednesday in Japan, at
the same time that the company details new plans for its North
American operations.

Indiana Gov. Mitch Daniels, who scored a win in March by
getting Toyota Motor Co. to agree to shift production of its
Camry sedan to a Subaru plant in Lafayette, said he had been in
talks with Honda for several months.

"The state is hopeful of being selected for this
investment, which is significantly larger than earlier news
reports indicated," Daniels said in a statement. "Indiana will
do all it can to compete successfully to be (Honda's) next

The competition to lure Honda's expected investment and the
thousands of jobs that would follow a new auto plant comes a
day after the U.S. Supreme Court rejected a challenge to an
earlier tax credit Ohio granted in order to land a Jeep plant.
Jeep is a division of DaimlerChrysler's Chrysler Group unit.

Mark Rickel, a spokesman for Ohio Gov. Bob Taft, confirmed
that state was talking to Honda about adding a third plant in
the state.

Ohio could be the frontrunner to land the new production
plant, said automotive analyst Erich Merkle of IRN Inc.

"I have to put Ohio really at the front," Merkle said,
citing Honda's already substantial presence in the state.

Honda opened its first U.S. assembly plant in Marysville,
Ohio in 1982 and opened a second plant in the state in 2000 in
East Liberty, where it builds the Element light truck.

In addition, Honda has a plant in Alabama, one in the
Canadian province of Ontario and one in the Mexican state of

Honda and Canadian government representatives scheduled a
news conference for Wednesday in Toronto to make an
announcement regarding an investment by the car maker.

The Canadian Press news agency quoted unnamed industry
sources in reporting that Honda had "all but ruled out" Canada
for the assembly plant and favored Alabama.

A spokesman for Alabama Gov. Bob Riley could not be
immediately reached for comment. A Honda spokesman in Detroit
had no comment on the company's reported plans.

Honda's planned expansion comes as Detroit-based automakers
Ford Motor Co. and General Motors Corp. are working through
restructuring plans that will close dozens of plants with tens
of thousands of jobs.

Michigan Gov. Jennifer Granholm is in Tokyo this week to
lobby for new investment for the state, which has been rocked
by the deepening woes for the domestic auto industry.

Spokeswoman Liz Boyd said Granholm had not met with Honda,
but wanted a chance to make her pitch.

"Gov. Granholm wants to make the case for Michigan," she
said, adding that no meeting with Honda was scheduled during
Granholm's short visit.

Honda's U.S. sales rose almost 8 percent in the first four
months of the year, lifted by strong gains for its Civic and
Ridgeline truck.

The company's strong growth in an otherwise stagnant U.S.
car market made it inevitable that it would have to expand
capacity, said IRN's Merkle, who added that Honda had been
slower to respond to its market share gains than larger rival
Toyota Motor Co.

"Toyota has been much more aggressive in its expansion
plans," he said.

(Additional reporting by Karen Pierog in Chicago and Wojtek
Dabrowski in Toronto)