Honda opens new plant while Big Three wither

20 November 2008

While the US government debates on providing a $25 billion bail-out for the Big Three of Detroit – General Motors Corp, Ford Motor Co and Chrysler LLC- which to many Americans symbolise the industrial might of the country, but are on the verge of bankruptcy, one event warmed the hearts and provided hope to many people. In Indianapolis, in southeast US, more than 1,000 US workers cheered the inauguration of Honda Motor's latest assembly plant in the country.

The coming up of the huge plant in the US countryside is in stark contrast to the layoffs and plant closings announced in recent months by General Motors Corp, Ford Motor Co and Chrysler LLC. Yet, it is true that while sales are crashing across the US, leading the Detroit Three to plead for government bail-out and leaving most European and Asian vehicle makers in tatters, Honda Motor Co stands out.

In the first nine months of the current year, Honda was one of just two car companies (the other being Subaru) which registered a rise in sales in the US. In August, Honda's share of the US market rose to a record 11 per cent, making it the No 4 auto maker, behind GM, Ford and Toyota, but ahead of Chrysler. Honda's sales have fallen 1.1 per cent this year in the US, compared with an 18 per cent drop for General Motors Corp, a 17 per cent decline for Ford Motor Co and a 25 per cent plunge for Chrysler LLC.

Sales for Toyota Motor Corp, Japan's largest automaker, have fallen 10 per cent. However, Honda's production in North America, where Honda gets 70 per cent of its operating profit, rose 13 per cent to 121,433 units. US production rose 9.9 per cent to 83,781 last month.
 
Honda's resilience is now being attributed to its relatively small and fuel-efficient small cars, a source of much amusement and derision to the Detroit Big Three when these were first launched in the US. In recent times though, when oil prices shot through the roof, the derision might have been replaced by envy, as these very cars became the highest selling cars in the country. Thirty-nine years ago, Honda launched its first small car, the tiny two-door N600, in the US market, which set the tone for more such cars in the years to come. While continuing to focus on smaller cars, Honda has also been conducting research on automotive technology to come up with cars that will run on alternate fuels.

The company's newly inaugurated plant at Indianapolis will manufacture the Civic GX, priced at $25,000 (Rs12.5 lakh) that runs only on natural gas – and gives a mileage of about 10 km to a litre of natural gas. Honda will produce 2,000 GX models in 2009 and will account for 1 per cent of the 200,000 vehicles the plant will produce every year. Another car the company is planning to introduce commercially is the Honda FCX Clarity, which will come with a hydrogen fuel cell. The Clarity will give a mileage of about 30 km per kilogram of hydrogen and can travel about 500 km between refuelings. It will release water vapor, instead of pollutants, into the air through its exhaust pipe.

Honda Motor, Japan's second largest car company, increased global production in September to meet demand for small cars in the US and emerging markets. Its output in the US rose 9.6 per cent to 360,453 vehicles in October, as it has benefited from one to two extra production days in the US this year.