Honda Motor Co. had a ceremony last Wednesday to break ground on a project for a new plant in Mexico that will produce the Fit small car, which will be exported to the U.S. as well as other markets. At the same time, it is expanding its local production footprint to fight the strengthening yen (which has been eating up profits).
This plant located near Celaya, Guanajuato, will start to operate in 2014 with a 200,000-vehicle capacity each year. Honda first mentioned this plant in August but back then, it declined to say what model will be produced there. In a statement, Honda said that this plant will boost Honda's production capacity in North America to 1.87 million units by the early part of 2014 from the current 1.63 million figure.
This new factory will have 3,200 workers. Honda made an announcement last January that it will produce the next generation Acura NSX sports car in Ohio. This car will start selling by the end of 2014. Rick Schostek, senior vice president of Honda of America Manufacturing Inc., said that Honda will soon have production lines in North America for various vehicles, ranging from subcompacts to super cars.
He said that in 2011, over 85% of the Honda and Acura models sold in America were assembled in the U.S., Canada and Mexico, with the use of parts sourced both domestic and globally. In the upcoming years, this will reach over 90%.
As Honda battles the yen’s strength against the dollar and euro, it is transferring more output outside Japan. The increase of the yen reduces profits and compromises the pricing power of Japan-built cars sold overseas. In the U.S. alone in 2011, 59,235 Fit units were sold by American Honda – 9% higher than 2010 sales.