The carmaker will spend $639 million by 2010 on a car and engine factory in Japan and $400 million on its sixth North American assembly plant by 2008, Tokyo-based Honda said on Wednesday. It will also construct a Canadian engine plant and a research centre in Japan and expand parts factories in Ohio and Georgia.
President Takeo Fukui will use Hondas highest-ever profits to invest a record 570 billion yen ($5.2 billion) this year while General Motors Corp and Ford Motor Co shut plants and fire workers. Four-month sales of Hondas Civic compact car in the US, its most important market, jumped 22% as rising gasoline prices prompted consumers to avoid trucks and sport-utility vehicles built by GM and Ford.
Honda clearly needs more capacity to meet strong demand for its fuel-efficient vehicles in North America, said Norihito Kanai, an analyst at Meiji Dresdner Asset Management Co, whose firm manages $2.5 billion in equities. Its the ideal time for the automaker to expand after just posting record earnings.
Hondas plan will create 1,840 jobs in North America, as it joins larger rival Toyota Motor Corp to produce more vehicles in a market that accounts for as much as 70% of operating profits. Hondas net income rose 23% last fiscal year to a record 597 billion yen on demand in the US and Asia.
Honda said it will hire 1,500 people to build 200,000 vehicles a year in the US, starting in 2008, without disclosing the plants location. Indiana governor Mitch Daniels said yesterday that state officials discussed building the plant in his state. Honda President Fukui said it will announce the location soon.
We need a new factory in North America because we were quite stretched while demand keeps on growing, Fukui said at a Tokyo press conference. The higher gasoline price is gradually shifting US consumers to fuel-efficient models.
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