Honda Losing Money on Imports to U.S. Including Popular Fit, Hybrids
June 12, 2012 10:50 AM
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Both Honda and Acura vehicles exported to the United States last year accounted for less than 6 percent of its 3.1 million sales worldwide
Honda was recently the first Japanese automaker to admit that it is losing money on exports from Japan to the United States.
According to Honda, both Honda and Acura vehicles exported to the United States last year accounted for less than 6 percent of its 3.1 million sales worldwide.
"Under the current exchange rate of 80 yen per dollar, our export business doesn't make any profit," said Fumihiko Ike, Honda CFO. "Definitely, the absolute number of exports to the United States will be decreasing.
Honda plans to cut shipments of some of its vehicles to the U.S. in an effort to offset these losses. However, the Japanese automaker's long-term goal is to move more production to North America, where it will also buy the parts and components needed for its vehicles.
Currently, Honda builds 85 percent of the vehicles it sells here in North America, but the need to increase this number is significant. Honda keeps selling the exports -- such as the Fit, Insight and
-- despite losing money because it wants to retain customers in the U.S. However, producing vehicles in the U.S. and then selling them in the U.S. will be cheaper for Honda and will allow the automaker to avoid what happened last year -- a shortage.
In 2011, Honda didn't have enough cars over in the U.S. to sell, so continued shipping money-losing exports for the sake of keeping customers.
Honda's solution is to shift
production of its Fit car
to a plant that the automaker plans to open in Mexico in 2014.
According to Ike, Honda currently doesn't make any profit on Fits sent to the United States, and because it's not profitable for Honda, it's also not profitable for car dealers. But the company keeps selling it here because it's a great car for younger generations and it wants to hold on to these customers. Once the plant in Mexico is complete, the Fit should be profitable. But for now, this particular vehicle is much more profitable in Japan where there are government incentive programs for fuel-efficient vehicles.
Honda CR-Z Hybrid
Honda is also looking to shift hybrid vehicle production to North America within a few years. The automaker is already looking for local hybrid component suppliers that carry lithium ion batteries.
The need to shift hybrid production is also significant, considering combined sales of the Civic Hybrid, CR-Z hybrid and the Insight hybrid totaled 31,582 units last year.
Honda will also build the
Acura NSX sports car with a hybrid drivetrain
in Ohio within a three-year period.
"We are not just simply shifting assembly from Japan to the United States," said Ike. "Of course, we have to expand local procurement, otherwise it's not cost-effective."
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RE: If not for
6/12/2012 6:01:30 PM
Same reason plants still exist in parts of the US with unions. The unions themselves. The companies are too afraid to go against the Canadian version of the UAW. The media would try to destroy them and at least in the US, with current administration they'd probably sue the company and sick the NLRB on them like they did with Boeing building a non-union facility here in SC.
And what happened with that? Boeing signed an agreement with the union in Seattle to promise to keep building planes there and, low and behold, the NLRB inquiry ended. As if its somehow illegal to say "Sorry it costs too much to do business here, we're going somewhere else".
And GM has cut just as much manufacturing in Canada as they have the US.
RE: If not for
6/12/2012 6:46:52 PM
Clarify for me, since the story disappeared? Is Boeing building a plant in SC or not? An absolute shame if the NLRB killed the deal entirely; Boeing's reliance on its union Seattle production base loses it a lot of sales from airlines worried a strike could delay delivery.
RE: If not for
6/12/2012 10:10:16 PM
Boeing has built a plant here in Charleston that is largely complete and it actually will be building another facility out past my house to build other pieces for planes, wings I believe.
The media spun it as "planned to build" for some reason when in fact the facility was built and operational (albeit still hiring). The question from the suit was would it be shut down.
Boeing's unions definitely have harmed them. When you have to worry about your work force striking every year or two, its hard to meet production schedules. Not to mention the much higher cost. The only good thing for Boeing is that its only real competition in the Western world, Airbus, operates not only in the US but in Europe where benefits and pay are also high due to the socialized nature of European countries.
Boeing though has brought a nice economic boost to the area. That the NLRB tried to kill that to bow to their union masters is deplorable. As is trying to make the claim that a company is not allowed to do business where it chooses and without union labor if it chooses. But I can see how the Democrats don't like that since it doesn't mean more money from thug union bosses.
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