Honda to Build Light-Truck Plant in Alabama
Honda Motor Co., charging into the rapidly growing light-truck market, said Thursday that it will build a $400-million plant in Alabama to make minivans and sport-utility vehicles.
The move illustrates the increasing importance of light trucks--minivans, sport-utility vehicles and pickups--in the U.S. auto market. It also shows how the Japanese manufacturers are muscling into territory dominated by Ford Motor Co., DaimlerChrysler and General Motors Corp.
“Honda is going where its customers obviously want to go,” said Michael Robinet, analyst with CSM Forecasting. “It’s the strongest part of the market.”
The 1.7-million-square-foot Alabama factory will employ 1,500 workers and open in early 2002. When fully up to speed, the plant will be capable of producing 120,000 light trucks a year.
Honda’s expansion comes as the U.S. auto industry is enjoying a prolonged boom and manufacturers are building new, efficient factories while retooling older car plants for truck production. GM is planning to build a new Cadillac assembly plant in Lansing, Mich., Honda’s Japanese rival Toyota Motor Corp. is expanding a truck factory in Kentucky and BMW of Germany is enlarging its South Carolina plant.
Honda also joins the march of manufacturers to the South. Auto makers are increasingly locating assembly and parts operations in Alabama, Kentucky, Tennessee and South Carolina, pro-business states where unions are weak, wage rates low and the supply of skilled labor ample.
The Honda plant will be built in Lincoln, a small town 40 miles east of Birmingham along Interstate 20. The company was enticed in part by a $158-million public-private incentive package that includes tax abatements, employee training and infrastructure development.
The Alabama plant will boost Honda’s annual North America production capacity to 1.13 million vehicles by 2003. The company now operates two assembly plants in Ohio and one each in Canada and Mexico. Honda also makes engines and transmissions in Ohio.
The North American market is important to Honda, accounting for 75% of its operating income. The company is best known in the U.S. for solid cars: the compact Civic and mid-size Accord. The two models spurred a 7% increase in Honda’s U.S. sales to 1 million vehicles last year. Sales are up 8% so far this year, helped by strong demand for the new Odyssey minivan and small CR-V sport-utility.
But Honda now lacks the capacity to be a major player in the increasingly important truck market. More light trucks than cars are expected to be sold in the U.S. this year for the first time ever.
“Honda is one of the finest car companies in the world, but they are very weak on the truck side,” said Sean McAlinden, a University of Michigan labor economist and auto researcher.
The new plant will give Honda additional capacity to boost its supply of Odyssey minivans, a highly touted people hauler that is so popular that dealers are having trouble keeping them in stock.
Honda could build the Odyssey in Alabama if demand warrants, or it could decide to build a mid-size SUV to compete with Ford’s Explorer and DaimlerChrysler’s Jeep Grand Cherokee. Honda will likely build a so-called hybrid SUV that looks and handles more like a car and less like a truck.
Analysts expect the SUV to be sold first under Honda’s luxury Acura brand to compete against Toyota’s popular Lexus RX300. A Honda version could be offered later.
“Our dealers are clamoring for new products,” said Tom Elliott, executive vice president of American Honda Motor Co. “More of our customers have moved into minivans and SUVs.”
Honda officials downplayed the importance of the incentives offered by Alabama, saying they were comparable to economic development packages typically given to relocating manufacturers.
