Honda plans for dollar to fall below Y100

TOKYO May 26,2008; Honda Motor Co intends to reduce its vulnerability to swings in foreign exchange rates by streamlining production and cutting costs, President Takeo Fukui said in a recent interview.

The company must be able to cope with a sustained fall of the dollar below 100 yen, Fukui said. The stronger yen eats into profits that the major Japanese automaker earns abroad.

Honda expects the yen’s recent appreciation against the dollar to shave 300 billion yen off its group operating profit in the current fiscal year to next March.

But the president expressed confidence that a planned auto factory in the town of Yorii in Saitama Prefecture, which is set to operate a state-of-the-art production system requiring only 80% of a conventional workforce, is so efficient as to be able to withstand the dollar’s fall below 100 yen.

Honda is set to start operating the Yorii plant in 2010 following the launch of a similarly cutting-edge plant in Ogawa Town, Saitama Prefecture, in the first half of 2009.

Fukui also indicated that his company plans to procure auto parts from abroad for vehicles that are made exclusively in Japan at present, such as minivehicles, in a bid to further reduce costs.

On Honda’s domestic market share of around 12 to 13%, Fukui said that the company has to raise the level to at least 15%, while expressing his resolve to revamp the flagging minivehicle sector.