`Transplant' Honda puts down deep roots in US
With plans to bring its total investment in the United States to about $2 billion, the Honda Motor Company can no longer be considered strictly a Japanese car manufacturer. Even the term ``transplant,'' which is used to describe those foreign automakers erecting assembly plants in the US, may be insufficient. For Honda is doing far more than just building ``kits,'' packages of new car components produced in Japan, then shipped to the US for final assembly.
``We are trying to establish in the United States a self-reliant motor vehicle company,'' explained Tetsuo Chino, president of Honda North America, an umbrella organization responsible for the company's diverse, large, and growing US and Canadian operations.
As proof of Honda's intent, Mr. Chino announced the latest in a string of new US investments at ceremonies in Columbus, Ohio, last Thursday:
A $380 million assembly plant - the carmaker's second in the US, and its third in North America - to go into operation by August 1989. The new plant will be built a few miles from Honda's existing Marysville, Ohio, assembly line.
A new US research-and-development facility and a US production engineering center, both aimed at developing products specifically tuned to the North American market.
An increase in the annual production capacity of a new engine and drive-train plant in Anna, Ohio, from 360,000 to 500,000 units, an expansion that will cost $150 million.
The $31 million purchase of the Ohio state government's Transportation Research Center, a modern engineering research facility now rented to a variety of auto companies.
In all, Honda is committed to roughly $2 billion in capital expenditures in the US.
On top of these investments, however, Chino announced Honda also plans to continue increasing its US content - that is, the percentage of components used in American-made cars that come from US factory operations operated by Honda or its outside suppliers.
In most cases, Japanese ``transplant'' assembly lines receive the majority of their components, such as engines, transmissions, and batteries, from Japan. Indeed, the Accords now being built in Marysville still use 50 percent imported parts.
Earlier this year, it was announced that Honda's domestic content will climb to 60 percent by 1988 and 67 percent by 1990. But now, Chino says, it will continue to grow to 75 percent by 1991.
Ironically, the domestic content of the traditional carmakers, notably that of Chrysler Corporation, is shrinking, so that by the early 1990s, Honda may use a larger percentage of US components than Chrysler.
And, Chino notes proudly, Honda may also surpass the traditional US manufacturers in another highly symbolic area: the export of cars from the US to foreign markets.
In the earliest days of the American auto industry, US-made cars could be found all over the world. Today, an American-assembled automobile is a rarity outside North America. In part, that's because of a good-neighbor policy, with US automakers building assembly plants in the markets where they sell cars.
But it is also the result of building cars the rest of the world has not wanted to buy.
By making its new factory highly flexible, to produce a mix of products on the same line - including the right-hand-drive models for Japan - Honda will be able to produce vehicles for markets all over the world.
``By 1991,'' Chino said, ``we expect to export 70,000 cars per year to Japan and other countries.''
The first cars for export will be a new and as yet unspecified Accord model (which industry sources say is a mini-van). But eventually, Honda's US factories could become the sole source for its new Acura luxury models. America is the largest market for both the Acura Integra subcompact and the Legend luxury sedans and coupes.
With a sales goal of 750,000 units here in the 1987 calendar year, that will be about 40 percent of the company's worldwide total. And while most other markets, with their volatile and highly competitive nature - including the Japanese home market - are yielding relatively minor profits, the US is a virtual gold mine.
``Their intent is to essentially become an American company,'' says David Cole, head of the University of Michigan's Center for the Study of Automotive Transportation. ``They're hardly a transplant anymore.''
That is a point echoed by Tadashi Kume, president of Honda Motor Company, during the announcement of Honda's new investments.
``We have become America's fourth-largest automaker,'' Mr. Kume said.