May 17, 2006

Honda maps growth plan with new plants in US, Japan

By Chang-Ran Kim, Asia auto correspondent

TOKYO (Reuters) - Honda Motor Co. outlined an aggressive
expansion plan on Wednesday that will see new car plants in the
United States and Japan to power it to a fresh global sales
forecast of at least 4.5 million cars in 2010.

Japan's third-biggest auto maker is capturing customers in
every corner of the world with its strong brand image and fleet
of fuel-efficient products, pushing car sales to a record 3.39
million units in the year ended March 31.

Much of the strength has come from Honda's firm
manufacturing footprint in local markets and its cutting-edge
environmental technology, and Chief Executive Takeo Fukui said
it would step up those efforts, including developing a low-cost
hybrid car and clean diesel engine for sale in three years.

"Global competition will intensify, but we will take the
necessary steps to succeed," Fukui told a news-packed mid-year
briefing. He cited the establishment of advanced manufacturing
systems, a larger overseas presence and stepped-up
environmental efforts as the keys to achieving that goal.

To respond to growing demand in North America, Honda said
it would also build a US$140 million engine plant near its
existing assembly plant in Ontario, Canada, with annual output
capacity of 200,000 units. The factory will begin operating in
2008, it said, with a planned headcount of 340 workers.

The Tokyo-based auto maker will spend $400 million on a
U.S. car plant -- its sixth in North America -- with planned
capacity of 200,000 units a year. The factory, whose location
is due to be announced by the end of July, will build passenger
cars starting in 2008 and employ more than 1,500 people.

Honda's U.S. sales are seen motoring higher this year as it
rolls out the revamped CR-V and other crossover models in a
segment getting a lift from rising gasoline prices. The
entry-level Fit subcompact launched last month is also expected
to drive volumes.

Fukui told Reuters in January that Honda would consider
expanding North American capacity if the Fit meets its goal of
bringing in customers without drawing buyers away from its
long-running Civic line. The Fit is imported from Japan.

The U.S. plant will raise Honda's North American production
capacity to 1.6 million cars from 1.4 million. That would still
be short of the 2 million-plus cars Honda expects to sell in
the region by the end of the decade, an executive said. Last
business year, Honda sold 1.682 million cars in North America.

Elsewhere, Honda will invest 70 billion yen ($640 million)
on a state-of-the-art car and engine plant in Saitama, near
Tokyo, featuring advanced manufacturing technologies. The
200,000 units-a-year plant -- its first in Japan in 30 years --
will start operating in 2010 with a planned work force of
2,200, and raise domestic car capacity to 1.5 million units.

Expansion in India will also accelerate, Honda said,
announcing plans to double car output capacity three years
ahead of schedule, to 100,000 units around the end of 2007.

A top executive said Honda was also studying development of
a global small car to fill the gap between the 660cc Life
minicar and the Fit class for sale in India, some parts of
Europe, and South America, among other regions.

Given the rapid expansion and efforts to develop
next-generation technology, a separate executive said Honda's
spending on facilities and R&D would grow "quite a bit"
annually for the time being.

This business year, Honda has projected capital spending of
570 billion yen -- up from 458 billion yen last year -- and R&D
outlays of 545 billion yen, versus 510 billion yen.

All told, Honda announced on Wednesday total spending of
$1.335 billion on the various projects, including construction
of a new R&D center in Japan.


Honda, which boasts the best average fuel economy among
auto makers in the United States, said it would also strive to
cut its vehicles' average carbon dioxide emissions by 10
percent by 2010 from 2000 levels, even as it sells more cars in
the bigger SUV and pickup segments.

To help reach that goal, Honda said it was developing a
new, low-cost hybrid car to be sold in 2009 at a price lower
than its popular Civic hybrid. It aims to sell 200,000 units of
the car a year worldwide -- half of that expected in North

"We aim to reach that level in the first or second year
after launch," Fukui said.

Honda said it was also developing a clean four-cylinder
diesel engine that would meet the United States' strict Tier2
BIN5 environmental standards that require nitrogen oxide
emission levels equivalent to those from a gasoline-powered

Fukui said Honda would also aim to develop a cleaner V6
diesel engine to tap potential for increased demand of the
fuel-efficient powertrain, which is gaining renewed traction in
the United States.

Under a three-year business plan, Honda, also the world's
top motorcycle maker, expects global car sales to reach 4
million units by the 2007/08 business year. It has forecast
revenue exceeding 10 trillion yen for 2006/07, a year ahead of

By 2010, Honda expects its global motorcycle sales to be at
least 18 million units, up 75 percent from last year.

($1=109.65 Yen)