Honda to build new US plant in Indiana

DETROIT - Japan's Honda Motor Co. Ltd. said it plans to build a new US$550 ($921.96) million US assembly plant in Indiana as it boosts capacity to meet increased demand for its cars in the world's largest vehicle market.

The plant will be constructed in Decatur County, near Greensburg, 50 miles southeast of Indianapolis, Honda said today.

Honda, the first Asian auto maker to build vehicles in the United States, has outlined an aggressive growth strategy for North America. The company plans for its North American sales to grow by 16 per cent to more than two million vehicles by the end of the decade.

The plant will begin production of 4-cylinder vehicles in the fall of 2008 with an annual production capacity of 200,000 vehicles and will employ 2,000 people, the company said.

Honda declined to say which vehicle would be built in the plant.

"It's not really a surprise," said Dave Cole, Chairman of Center for Automotive Research in Ann Arbor, Michigan. "The automakers want to be the highest-paying employer and they want to have a pool of experienced workers, so Indiana was an expected choice for Honda." The new Indiana plant, Honda's sixth assembly plant and 14th major plant overall in North America, will help boost Honda's total North American production capacity to more than 1.6 million units in 2008 from 1.4 million units.

Analysts said Honda could also be eyeing the truck market with the additional capacity.

Honda, which saw US sales rise 5.2 per cent to 1.4 million vehicles last year, has been grabbing US market share along with larger Japanese rival Toyota Motor Corp. at the expense of Detroit's traditional Big Three automakers, General Motors Corp., Ford Motor Co. and Chrysler.

Last year, Honda's US share grew 0.4 percentage points to 8.6 per cent in a market that was almost stagnant. Its expansion comes as General Motors and Ford are in the midst of shedding a total of up to 60,000 jobs and shuttering 26 plants in the next few years.

The Indiana site is about 100 miles from Honda's engine plant in Anna, Ohio, which will supply four-cylinder engines to the Greensburg plant.

"The density of the supply base allowed us to choose this location," said Larry Jutte, senior vice president, Honda of America Manufacturing.

The state of Indiana is providing about US$85 million in incentives to Honda, including about US$45 million to improve infrastructure, Indiana Governor Mitch Daniels told reporters.

Indiana beat Ohio, a state that is home to other Honda facilities and had been seen as a front runner for the location for the plant. The Japanese automaker has two assembly plants in Ohio and one in Alabama.

"One of the concerns they had with Ohio was that a number of Honda suppliers were located there," Cole said. "Honda's pay is higher than their pay, which would have drained workers away from the suppliers." Ohio governor Bob Taft said the good news is that the plant is located in the state's backyard.

"It's not located in Alabama or Georgia where our suppliers are shut out of the picture," he said.

Honda executives declined to comment on other states that were considered for the location.

- REUTERS