July 7 (Bloomberg) -- Stan Bell, a 61-year-old retired government worker from Clinton, Michigan, is the reason Honda Motor Co. may widen its stock-market lead over Toyota Motor Corp.

After wrecking his Accord sedan, Bell returned to the dealer to replace it with a Civic EX, Honda's most fuel- efficient gasoline vehicle.

``With this economy people have to be careful with pennies,'' he said. Bell had to pay the sticker price of about $22,000 and wait a few days for the dealer to take delivery of the 36 miles-per-gallon car.

As the average U.S. price of regular gasoline has risen 39 percent in a year -- to $4.10 a gallon, according to the AAA motor club -- Honda's flexible North American factories have been running at full tilt. Japan's second-biggest automaker is shifting production from trucks to automobiles to keep up with surging demand for fuel-efficient vehicles, while larger Toyota is closing its San Antonio plant for 14 days between now and the end of October to reduce output of Tundra pickups.

It might take Toyota a year or more to convert the truck plant to auto production, said Michael Robinet, an analyst with automotive consulting firm CSM Worldwide Inc. in Northville, Michigan. Toyota's pickups, unlike Honda's, don't share basic design structures with its cars.

Shifting Production

Honda's assembly lines can switch models in as little as 10 days, spokesman Sakae Uruma said. That lets the company build fewer 20-mpg Ridgeline trucks in favor of Civic compacts. The company will move production of the Ridgeline truck to its Alabama factory in early 2009 from its Ontario assembly plant, allowing it to build more Civics in Canada, it said in March.

Toyota doesn't have information on how quickly its truck plants can change to car production because it differs ``according to the type of model we switch to,'' Tokyo-based spokesman Hideaki Homma said.

Nimbleness and a longtime focus on small cars have made Honda the only one among the six biggest automakers in the U.S. to increase production in North America this year, according to data from each company.

The company's adaptability will help Tokyo-based Honda expand a 14 percentage-point lead since Dec. 31 over Toyota, said Madelynn Matlock, who runs an international-equity fund within Huntington National Bank's $3.7 billion investment portfolio.

Honda ``plants are so flexible, so capable of switching products to meet changes in the market,'' she said. ``Toyota has over-expanded. It was too focused on volume gains, on beating GM.''

Buying the Stock

Matlock, based in Cincinnati, is among investors boosting bets on Honda. She raised her stake in the company, the only automaker she holds, to 152,000 shares in late 2007. Milwaukee- based Artisan Partners bought 3.22 million shares in the first quarter and New York-based Tweedy Browne Co. purchased 2.56 million, according to data compiled by Bloomberg.

San Francisco-based fund manager Mark Yockey of Artisan Partners didn't respond to a call and e-mail seeking comment. Tom Shrager, a managing director at Tweedy Browne in New York, confirmed the purchase and declined to make additional comment.

Honda has fallen 3.7 percent in Tokyo trading since the end of December, though it has recovered from a three-year low in March. The company may gain 18 percent in the next 12 months, according to Nikko Citigroup's Noriyuki Matsushima, one of 11 analysts rating the stock ``buy.'' Nine say to hold and one recommends selling.

Toyota has slumped 17 percent in 2008.

Honda gained 0.8 percent to 3,610 yen as of the close of trading in Tokyo. Toyota rose 1.4 percent to 4,990 yen.

Passing Chrysler

Purchases by customers such as Mark Rother, 45, in Tujunga, California, helped Honda pass Chrysler LLC in U.S. sales in May and June, becoming the country's fourth-largest auto marketer. It's the only one among the top five car companies, including General Motors Corp. and Toyota, to post 2008 U.S. sales gains.

Rother traded in a 2000 Chrysler Dodge Caravan SE minivan last month for a 2008 Honda Fit Sport hatchback getting up to 33 mpg. While his old vehicle's quality and operating costs played a role in the trade, the rise in gasoline prices was ``50 percent of the reason we wanted to get a smaller car,'' he said.

``It's not as powerful as I'd like, but I'd rather have the fuel economy,'' Rother said.

U.S. sales at Honda gained 1.1 percent last month and 4.1 percent in the first half, the company said July 1. American- made vehicles made up 76 percent of Honda's U.S. sales from January through June.

Toyota's sales plunged 21 percent in June and 6.8 percent in the first half. U.S. production represented 56 percent of vehicles sold in the country, according to the company.

New Plant Opening

Honda, which says it has the country's most fuel-efficient vehicle lineup, will open a small-car factory in Indiana later this year. Toyota's truck-assembly lines in Indiana and Texas are at 70 percent to 80 percent of capacity, according to Koji Endo, a senior analyst with Credit Suisse Group in Tokyo.

Ichiro Takamatsu, chief investment officer at Alphex Investments Co., a Tokyo-based hedge fund, still favors Toyota over Honda as the larger company becomes less reliant on North America.

Toyota, which replaced Honda as the biggest Japanese automaker in China last year, gets about 50 percent of operating profit from North America, compared with 70 percent for its competitor, according to Nomura Securities Co.

``Toyota can weather the hardship caused by sluggish U.S. sales of its trucks,'' said Takamatsu, whose fund owns the company's shares. ``Earnings from other markets are growing fast to make up for the drop.''

A focus on small cars was a deciding factor for Dan Poole, vice president of research for Cleveland-based National City Bank, which bought 1.98 million of Honda's American depositary receipts in the first three months of 2008, according to regulatory filings.

``No exposure to the larger vehicle segment is a big consideration,'' Poole said.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net.

Last Updated: July 7, 2008 02:43 EDT