Honda's European plant closings shifts work to North America

Europe’s loss will be North America’s gain as Honda shutters two assembly plants in a global push to lift factory utilization rates above 100%.

When Honda ends production in the UK and Turkey in 2021, the automaker will shift reliance to its US and Canadian plants to meet Civic demand there.

That increased factory responsibility was just one outcome of the European overhaul announced last week here by Honda CEO Takahiro Hachigo. Honda’s Swindon plant in the UK makes the Civic hatchback for the US. Although US Civic sales were down 14% to 325,760 vehicles in 2018, nearly a third of that volume was imported.

“Given our efforts to optimize production allocation and production capacity on a global scale, we have concluded that we will produce the Civic for North America in North America,” Hachigo said.

Honda is reworking its global production footprint for three reasons: to soak up excess capacity, pave the way for electrification and refocus on the global markets where it sells the most vehicles.

Honda has worldwide capacity to turn out 5.4 million vehicles a year. But last year, it sold only 5.24 million, giving it a utilization rate of around 97%. The new measures will trim global capacity to 5.1 million, requiring a utilization ratio exceeding 100% through overtime, Hachigo said.

Honda also will consolidate production of electrified vehicles into global hubs, including Japan and China, as it gears up to derive two-thirds of its total sales from electrified vehicles by 2030.

“We have decided to carry out this production realignment in Europe in light of our efforts to optimize production allocation and production capacity globally, as well as accelerating electrification,” Hachigo said.

He said closing the Swindon plant after 30 years of operation had nothing to do with the worrisome trade issues being raised by Brexit, the UK’s departure from the European Union.

Honda’s withdrawal from European automaking comes amid uncertainty about the impact of Brexit and the prospects of a new free-trade pact between Japan and Europe.

Hachigo conceded that the new Europe-Japan trade accord made it more competitive to ship cars from Japan.

The wind-down of the factories was timed to the life cycle end of the current-generation Civic.

Honda did not say where in the US the next-generation Civic will be manufactured or detail how many more vehicles might be produced in North American plants.

Honda currently makes the Civic at its Alliston, Ontario, plant and its factory in Greensburg, Indiana. Last year, Honda manufactured 1.84 million vehicles in North America, including 281,126 Civics, according to the Automotive News Data Center.

Honda’s Swindon plant, opened in 1989, builds the Civic five-door hatchback for global markets including Europe and the US. It employs 3,500 people and produces about 150,000 vehicles a year. Its Turkish plant builds the Civic sedan and produces about 38,000 vehicles.

Honda said it will consult with related parties in both countries about next steps for workers.

Plant closings are rare for the Japanese automaker. In October 2017, Honda said it would shutter a Japanese assembly plant as it shifts manufacturing know-how toward electrified vehicles.

It said the aging Sayama plant will wind down by March 31, 2022, and consolidate operations around the nearby Yorii plant, one of the automaker’s newest.

Yorii, which opened in 2013, will be positioned as a worldwide centre for developing cutting-edge manufacturing technologies as well as techniques for producing electrified vehicles.

“We will create electrification technologies at our Yorii plant and will introduce such technologies horizontally in the US, Japan and China, where we can expect sales volume,” Hachigo said. “Then we will utilize those technologies on a global basis.”

As part of the changes announced last week, Honda said it will fill the vacant chairman’s post. Toshiaki Mikoshiba, who oversees global sales and marketing as well as North American operations, will become chairman.