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Honda's Flexible Plants Provide Edge; Company Can Rejigger Vehicle Output to Match Consumer Demand Faster Than Its Rivals Linebaugh, Kate . Linebaugh, Kate. 

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ABSTRACT It has been a tough year for most auto makers in the U.S. Housing woes and the slumping economy have depressed overall vehicle sales, and high gasoline prices have spurred American consumers to buy small cars instead of the pickup trucks and SUVs that were so popular in years past. Even mighty Toyota Motor Corp. has seen its U.S. sales fall 7.8% But U.S. sales at Honda, Japan's No. 2 auto maker, are up 1.7% in the period, and its U.S. market share has vaulted to a record 11.1% in August. FULL TEXT East Liberty, Ohio -- One recent morning, the Honda Motor Co. plant here churned out 120 Civic compacts. Then the

production line came to a halt and workers in white uniforms swept in to install new hand-like parts on the giant gray

robots that weld steel into the cars' frames.

About five minutes later, the line roared back to life, and the robots began zapping together a longer, taller vehicle, the CR-V

crossover.

In the automotive world, this is considered quite a feat. Until a few years ago, most auto plants in North America could

make only one vehicle without substantial investment. Now, other manufacturers have a few flexible plants. A Ford Motor

Co. plant in Oakville, Ontario, for example, makes three different vehicles, and many plants can produce slight variations on

one basic car or truck.

But switching from one model to a completely different one still can take weeks and millions of dollars. Ford will spend at

least $75 million to overhaul a sport-utility-vehicle plant in Michigan to make small cars, and the work will take 13 months.

General Motors Corp. is retooling its Lordstown, Ohio, plant to produce a new model at a cost of $350 million.

The manufacturing dexterity of Honda's plants, now the most flexible in North America, is emerging as a key strategic

advantage for the company. In an era of volatile gasoline prices, Honda can adjust production to inventory levels faster

than its competitors. Earlier this year, when gasoline prices reached $4 a gallon, the company slowed production of its

Ridgeline pickup truck at its Canada plant and increased output of better-selling vehicles.

In recent weeks, fuel prices have eased. If prices continue to fall and demand for larger vehicles improves, Honda has the

ability to adjust faster than its competitors, says Ron Harbour, a partner at Oliver Wyman, publisher of the Harbour Report

on auto production.

It has been a tough year for most auto makers in the U.S. Housing woes and the slumping economy have depressed overall

vehicle sales, and high gasoline prices have spurred American consumers to buy small cars instead of the pickup trucks and

SUVs that were so popular in years past. In the first eight months of the year, sales were down 24% at Chrysler LLC, 18% at

GM and 15% at Ford. Even mighty Toyota Motor Corp. has seen its U.S. sales fall 7.8%

But U.S. sales at Honda, Japan's No. 2 auto maker, are up 1.7% in the period, and its U.S. market share has vaulted to a

record 11.1% in August. It is now the No. 4 auto maker in the U.S., behind GM, Toyota and Ford but ahead of Chrysler. It sold

only 3,600 fewer vehicles than Ford in August.

Honda faces plenty of challenges. Sales of its pickup truck have been disappointing. Its upscale brand, Acura, struggles to

stand out in a segment dominated by Toyota's Lexus unit, BMW AG and Daimler AG's Mercedes-Benz unit. And while Honda

is known for fuel efficiency, it will have to race to catch up to Toyota in gasoline-electric hybrids.

Honda's most obvious strength is a model line of mainly small and fuel-efficient vehicles. It avoided making the kind of big

pickups and SUVs that have heavy steel frames beneath their sheet metal. The Ridgeline and Honda's SUV-like vehicles use

lighter, car-like underpinnings.

In addition, just as demand for small cars is rising, Honda is about to expand its ability to make Civics. A new Greensburg,

Ind., plant is set to start production in a few weeks. By next year, it will make about 16,000 Civics a month.

But Honda's manufacturing flexibility is almost as key to its success as its product lineup. To respond to changes in

economic conditions, Honda is able to shuffle production among different plants as well as make different models in one

plant.

A decade ago, the company invested $400 million in its three Ohio facilities to make them flexible. That allowed it to stop

importing the CR-V from a plant in Britain when the weak dollar was hurting margins. Later this year, output of the

Ridgeline pickup will be switched from Alliston, Ontario, to Lincoln, Ala., so the Canadian plant can expand Civic capacity.

Auto makers used to design a new manufacturing process each time they designed a new car, and older assembly plants

reflect that. At Honda, a variety of models can be assembled efficiently because almost all of its vehicles are designed to be

put together the same way, even if their parts are slightly different. Here in East Liberty, the doors are installed on the Civic

and CR-V at the same stage of the process, and their side panels are joined to their roofs at the same point in the production

line.

Another key is the gray robots. They use a Honda-engineered device much like a hand to hold the parts during the welding

process. Workers simply put different "hands" on the robots to handle the parts for different vehicles.

Honda's plants are also set up to produce a fast-selling product like the Accord as well as several slower-selling models like

the Element and Acura RDX. That way Honda can adjust production of vehicles that fall out of favor faster.

The new plant in Indiana will start off making Civics but could make any of Honda's vehicles, says Larry Jutte, a senior

manufacturing executive for Honda in Ohio. "We have the flexibility to do what is necessary," he says.

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DETAILS

Subject: Automobiles; Gasoline prices; Flexible manufacturing systems; Production methods; Automobile production; Robots; Energy efficiency; Vehicles; Manufacturing; Factories

Business indexing term: Subject: Gasoline prices Flexible manufacturing systems Production methods Automobile production Manufacturing Factories; Corporation: Toyota Motor Corp Mercedes-Benz Group AG

Company / organization: Name: Honda Motor Co Ltd; NAICS: 336110, 336390, 336991

Classification: 9179: Asia & the Pacific; 8680: Transportation equipment industry; 5310: Production planning & control

Publication title: Wall Street Journal, Eastern edition; New York, N.Y.

Pages: B.1

Publication year: 2008

Publication date: Sep 23, 2008

Publisher: Dow Jones & Company Inc.

Place of publication: New York, N.Y.

Country of publication: United States

Publication subject: Business And Economics--Banking And Finance

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ISSN: 00999660

Source type: Newspaper

Language of publication: English

Document type: News

ProQuest document ID: 399105360

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Last updated: 2025-01-29

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