Dec. 19 (Bloomberg) -- Honda Motor Co., Japan's second- largest automaker, expects fuel-efficient models to help it boost sales in the U.S. by 3 percent next year, even as the overall market shrinks.

U.S. sales may rise to 1.59 million units in 2008 from an estimated 1.55 million in 2007, President Takeo Fukui said at a press conference in Tokyo today.

Tokyo-based Honda sells about half its autos in North America, where the popularity of the Fit compact and the CR-V sport-utility vehicle is shielding the company from a slump in industrywide demand. Customers are opting for Honda's cars and small SUVs over larger SUVs and pickup trucks built by General Motors Corp. and Ford Motor Co. amid rising gasoline prices.

``Honda is better positioned than rivals to withstand a slowdown in the U.S. because of its strong brand,'' said Hiroyoshi Nakagawa, who helps manage about $1 billion in Asian equities at Societe Generale Asset Management Co. in Tokyo. ``Drivers buy the cars because they know they have the latest technology.''

The company's preliminary global sales for 2007 gained 6 percent to a record 3.76 million vehicles as growth in smaller markets outpaced the U.S. and offset a 12 percent drop in Japan.

Europe, U.S.

The carmaker forecasts sales in Europe next year will rise 11 percent to 420,000 and says sales in China may jump 17 percent to 490,000.

Honda was unchanged at 3,690 yen at the 3 p.m. close on the Tokyo Stock Exchange.

The company is on course to post record U.S. sales for an 11th consecutive year in 2007, after it introduced a redesigned version of the Accord sedan in September. For the year, Honda's preliminary U.S. sales totaled 1.55 million vehicles. By contrast, GM's sales slipped 6.1 percent and Ford's declined 12 percent in the first 11 months.

Honda has six auto plants in North America and will open a seventh factory in the second half of 2008, in Indiana. The plant will make 200,000 Civic compact cars a year, raising production capacity in the region to more than 1.6 million vehicles.

The Civic gets about 40 miles to the gallon on highways, double the average mileage of most GM and Ford SUVs.

The company will raise production capacity in Brazil by 20 percent to 120,000 vehicles a year in August 2008, after sales in South America surged 30 percent this year.

In Japan, the company will spend 48 billion yen ($424 million) to build a new research and development facility dedicated to its Acura luxury brand, Fukui said. It will start partial operations in 2009.

Accord

The new Accord will help raise global sales in 2008, Fukui said. The company today said it will introduce the model as the Inspire in Japan on Dec. 21, aiming to sell 500 units a month. Honda plans to introduce four new models next year, he said.

``Our sales in all regions, including Japan, will rise next year,'' Fukui said.

The carmaker is lowering the production costs of Inspire cars in Japan by importing more parts. About 30 percent of the engine components for the model are made abroad, compared with the previous version's 7 percent, Honda said.

Honda and other Japanese automakers are increasing production overseas to meet local demand and minimize the effect of currency fluctuations. Honda would be able to cope with a rate of 100 yen to the dollar, Fukui said. The Japanese currency traded at 113.25 to the dollar as of 3:28 p.m. in Tokyo.

Hybrids

Honda, trailing only Toyota Motor Corp. in building gasoline-electric vehicles, expects hybrids to make up 10 percent of its global sales of about 4.5 million units in 2010, Fukui reiterated.

The carmaker will add two models to its hybrid lineup. It plans to sell a new five-seat hybrid by 2009 and is developing a hybrid sports car based on the CR-Z coupe concept unveiled in October.

Fukui didn't rule out seeking a partner to develop new batteries for hybrids and fuel-cell vehicles. Toyota is teaming up with Matsushita Electric Industrial Co., and Nissan Motor Co. is working with NEC Corp. Honda is open to alliances ``as long as they make better batteries,'' he said.

Honda, the world's largest motorcycle maker, also said global sales of two-wheelers jumped 6 percent to 13.4 million in 2007. It plans to roll out a 100-cc motorcycle that offers 15 percent better fuel economy than current models, Fukui said. The company plans to raise production capacity for motorcycles in Brazil by 33 percent to 2 million units a year in 2009.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Tetsuya Komatsu in Tokyo at tekomatsu@bloomberg.net

Last Updated: December 19, 2007 02:08 EST