Honda Makes More Cuts in Japan and North America

TOKYO January 26, 2009; Sachi Izumi and Yumiko Nishitani writing for Reuters reported that Honda Motor Co, Japan's second-biggest carmaker, announced further production cuts in North America and Japan, as the industry struggles with weak demand in a brutal economic downturn.

The company said it will slash production by an extra 29,000 units in North America and by a further 21,000 units in Japan.

Automakers globally are reeling from a sharp downturn in demand due to a global recession and tight credit, and are under pressure to put off big investments and expansion plans to weather the storm.

Honda's North American output will total 1.26 million units in the year to March, down 14 percent from its original plan made in April, and Japan output will be 1.15 million units, down 12 percent from its initial target, Honda said in a statement.

Honda's North America and Japan production volume this fiscal year will be 12 percent below the year-ago level.

However, the Nikkei business daily said Honda will boost production capacity in China, where it expected strong demand for its fuel-efficient vehicles.

The paper said Honda planned to raise total output capacity in China to 650,000 vehicles a year, up from 530,000 by modifying existing lines at its Dongfeng Honda Automobile unit, which assembles the Civic car and the CR-V sport utility vehicle. This would be done at a cost of several billion yen, the Nikkei said.

Honda spokeswoman Akemi Ando said Dongfeng was capable of producing 240,000 vehicles, double its current capacity by modifying or adding more lines but it did not have any immediate plans to do so due to weak demand.

Car sales growth in China, the world's second-largest auto market, slowed to a single-digit rate last year for the first time in at least 10 years as consumer confidence waned in a slowing economy.

Honda's China vehicle sales increased 11.7 percent last year, slowing from a 31 percent rise in 2007.

Editing for Reuters by Brent Kininmont and Anshuman Daga