Honda Updates Comprehensive Corporate Strategy

1/3/2001 6:16:28 AM

Honda Motor Co., Ltd., (NYSE: HMC) today announced an ambitious strategy to enhance corporate value through a major expansion of sales within each of its three product lines -- based on accelerated innovation throughout the company, including manufacturing and research and development.

With annual sales achieving an all-time record of nearly 11 million motorcycles, automobiles and power products in the most recent fiscal year (ended March 31, 2000), Honda announced a dramatic new sales target of 16 million units for the fiscal year ending March 31, 2004. "Honda's goal is to be a company at the leading edge that creates new values for our customers," said Honda President and CEO Hiroyuki Yoshino, during a press conference at the company's headquarters in Tokyo. "As a unique company with a variety of 'Powered by Honda' products and a wide- ranging customer base, we will continue the challenge to enhance the value of the global Honda brand."

Honda's FY 2004 sales target represents an expansion of all three product lines; with motorcycle sales forecast to reach 7 million units, an increase of 2.6 million units; automobile sales to reach 3 million units, an increase of 500,000 units; and power products to increase sales by 50% to 6 million units. To achieve these aggressive sales targets, Honda will focus on growth segments within each product line. The biggest increase in motorcycle sales will be achieved in Asia and other newly industrialized countries. Power product sales will expand largely through OEM engine business. The expansion of auto sales will focus on the growing light truck segment in North America and strengthening the small car line-up in Japan and Europe. Based on the long-standing philosophy of, "building products in the markets where they are sold," Honda now has more than 100 manufacturing facilities in 33 countries. Sales growth in Honda's three product lines will be based on this global production capability, with increasing local content of those regionally produced products. Beginning this fall, Honda will implement a new global manufacturing system that will position the company to establish a global product supply network to make the best use of Honda's major factories around the world.

Region by Region
Looking at Honda's automobile business by region, the company forecasts the following sales targets for the fiscal year ending March 31, 2004:

  • North America: sales of 1.45 million units annually, up 150,000 units.
  • Japan: sales of 900,000 units annually, up 200,000 units.
  • Europe: sales of 350,000 units annually, up 100,000 units.
  • Other regions: sales of 300,000 units, up 80,000 units.

In North America, Honda will further expand the product lineup concurrent with the expansion of local production. As previously announced, Honda's new Alabama auto and engine plant will start production in the latter half of 2001, a half-year earlier than originally planned, in response to accelerating demand in the light truck segment.

In Japan, Honda will adopt an aggressive strategy to launch more than 20 new or full model change models in the near future -- particularly in the "RV" and super mini-car segments. This also will include a new small model to be introduced in 2001 and targeted at European markets as well. In Europe, Honda's second automobile plant currently under construction in the U.K. will begin producing the new Civic starting from Spring 2001, followed by a new small model in 2002. The total annual production capacity of the U.K. plant will increase from the current 150,000 units to 250,000 -- as a result, 70% of vehicles sold in Europe will be locally produced. In addition, the U.K. plant will begin exports outside of Europe for the first time and will now be included in Honda's complementary global product supply network to efficiently provide each region with models that meet their needs.

New Global Manufacturing System
Leading innovation in the manufacturing area is the implementation of Honda's new manufacturing system on a global scale. The company intends to double in-house resource efficiency through the new system, which covers Honda's major vehicle and component production facilities. This new system will increase the speed and flexibility of Honda's global production system by reducing the time and investment needed to bring new models to mass production, or to add an existing model to a different plant. It will further increase efficiency by significantly reducing the costs associated with re-tooling for new model production. As a result, in FY 2004, Honda forecasts savings of 100 billion yen when compared with FY 2000 -- even at the same production level. Further, similar production systems will be applied to motorcycle and power products manufacturing. Based on this savings and cooperative cost reduction efforts by suppliers, Honda will either develop and aggressively introduce more competitive products or increase per unit profitability.

Digital Development Technology
Regarding innovation in research and development, Honda announced that it has developed and is utilizing a new Information Technology (IT) development system for automobile product development called "Digital Manufacturing Circle" (DMC). This advanced IT system works as a global database network from design through production engineering. Honda is using this new system to shorten new model development time and to reduce the number of costly prototype models required to achieve a production standard.

The Environmental Challenge
Honda is committed to a 3-stage approach to powering its motor vehicles in the future: 1) maximizing the efficiency of new internal combustion technology, 2) simultaneously, developing and expanding the new hybrid system, 3) shifting to fuel cell powered vehicles, when the necessary infrastructure is completed.

Notably, Honda is now developing an all-new "next generation" series of compact, lightweight 4-cylinder gasoline engines with significantly enhanced efficiency, performance and reduced emissions. This new engine series will be introduced for mass-market products this fall in Japan. All of Honda's gasoline 4-cylinder auto engines worldwide will be replaced with this next generation series by 2005.

Also, Honda is now developing its IMA (Integrated Motor Assist) gasoline- electric hybrid powertrain technology for use with this next generation engine series. Honda will launch a version of the new Civic with this innovative hybrid system in 2001, beginning with the Japanese market, with plans to expand sales to other markets in the near future. For motorcycles, a new model with more than 30% better fuel economy will be introduced, targeting primarily customers in newly industrialized countries.

Honda designs, manufactures and markets automobiles, motorcycles and power products worldwide. Honda is the largest engine maker in the world, producing nearly 11 million engines annually for its three product lines, including sales of engines to other manufacturers. Honda also builds products in more than 100 manufacturing plants in 33 countries, employing more than 125,000 associates globally.