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 6:44:08 PM
Labor is a diminishing part of the manufacturing equation, especially with newly built plants built with all the modern automation, so labor cost isn't as huge a factor as it once was.
I'd also be careful not to paint Canada with a wide socialist brush. It's just spent quite a while under Harper, a conservative that's drilling for oil and gas as quickly as he pleases. Some areas in Canada are better then others.. As you said, it built a plant in Ontario, not Quebec.
Finally, if the logic worked as well as you thought, Sweden of the 90s with its government spending as a % of GDP of over 70% wouldn't of faced near-collapse and had to practically restructure its approach to business and commerce from the ground up. France would be the most powerful, vibrant economy of the Western world. Spain would be lecturing us all on how to craft effective 'macroprudential' regulation.
Oh, and "free" healthcare? Thanks for showing your "I'm a liberal" card. Nothing is free, fool.
RE: If not for
6/12/2012 7:36:31 PM
Total labor costs may not be as high as they would be without automation, but the skill of the labor needed to maintain a sophisticated automated assembly line is greater - which turns the advantage to areas with an educated workforce.
I don't think anyone would argue that, "the more socialism the better", any more than they should argue, "the more capitalism the better". The ideal would balance the two. Thanks for showing your "I don't understand English" card, by the way. Health care in Canada is free, in the same way public education is free. Nobody objects to the phrase "free public education", because everybody knows that the phrase is shorthand for "not paid for by the consumer, but by the community". Welcome to English, where words have more than one meaning.
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