Honda Motor Co. (7267)’s choice to build what it calls a racing-oriented “supercar” in Ohio highlights confidence in its U.S. engineers and plants. It also shows the difficulty of producing autos in Japan as the yen rises.
When the high-performance hybrid Acura NSX goes on sale within three years, it will be the most expensive and technologically advanced car ever built in the U.S. by an Asian or European automaker. Ohio will be the sole global production site for the car executives suggest will sell for more than $100,000.
“This is a halo vehicle,” said John Shook, a former Toyota engineer, referring to a model that represents the highest ideal of a brand. He is also chairman of the Lean Enterprise Institute in Cambridge, Massachusetts, which consults on efficiency techniques. “Where you make it makes a statement. It’s a great thing for their local operation, and indicative of challenges in Japan.”
The surprise NSX plan, revealed by President Takanobu Ito in Detroit last week, follows Honda’s August announcement that a Mexican plant will make small cars to curb losses from exporting models such as the Fit from Japan. The two projects will give Honda the ability to produce its entire vehicle range, from cheapest to most expensive, within North America, a first for any carmaker based outside the U.S.
The original $89,000 NSX that sold from 1989 to 2005 was built in Suzuka, Japan, and was favored by performance-car fans for its high power and light, all-aluminum body. It gained pop- culture fame when it was driven in 1994’s “Pulp Fiction” by Winston “The Wolf” Wolfe, played by Harvey Keitel.
Noting a destination is 30 minutes away, he says: “I’ll be there in 10.”
Honda’s production shift along with rising North American capacity for Toyota Motor Corp. and Nissan Motor Co. (7201) signal a long-term move by Japan’s automakers to battle currency-related losses.
The yen has risen 7.7 percent against the dollar in the past 12 months, the strongest performer against the 16 most- traded currencies tracked by Bloomberg. Each one yen rise against the currency cuts Honda’s operating profit by 15 billion yen ($195 million), according to the company.
“It may be an appeal to the U.S. market, to show Honda starting production of an edgy car in the U.S.,” said Mitsushige Akino, who oversees $600 million at Ichiyoshi Investment Management Co. in Tokyo. “It may also be a message to the Japanese market of Honda’s actual start of a production shift.”
Honda, which has its U.S. headquarters in Torrance, California, also needs the new sports car to attract customers to other Acura models. U.S. deliveries of the brand’s cars and sport-utility vehicles fell 7.7 percent last year to 123,299.
The company’s American depositary receipts rose 1.9 percent to $34.54 at the close in New York. They’ve gained 13 percent this year.
Carlos Ghosn, chief executive officer of Nissan and its alliance partner Renault SA (RNO), has warned that unless Japan finds a way to tame the yen’s rise, the country’s auto industry faces a “hollowing out” of domestic production.
Nissan has moved fastest among Japan’s automakers to shift production of low-cost autos to Thailand and Mexico, and last year was the second-biggest importer of vehicles into Japan, behind only Volkswagen AG. (VOW)
Honda’s choice to make its costliest model abroad is unprecedented, said Koji Endo, an auto analyst at Advanced Research Japan.
“I was surprised,” said Endo, who is based in Tokyo. “Even with this currency burden, I believed NSX would be one of the models that kept production in Japan, being high-end and with a hybrid system.”
The all-wheel-drive NSX will have a newly developed two- motor hybrid system that Honda says delivers high performance and handling as well as fuel efficiency.
“Even as we focus on the ‘fun to drive spirit’ of the NSX, I think a supercar must respond positively to environmental responsibilities,” Ito said in Detroit on Jan. 9.
The company plans to race the car as well as sell it, said Ito, who was lead engineer on the first NSX in the 1980s. Its “mid-engine” design houses most of the weight of the powertrain in the center of the vehicle for optimal balance and agility.
While Honda doesn’t yet make any hybrids in North America, this year it starts producing a gasoline-electric version of the new Acura ILX sedan in Greensburg, Indiana.
“Honda believes in setting ‘stretch goals’ for engineers, and that’s clearly what NSX represents,” said Jeff Liker, an engineering professor at the University of Michigan in Ann Arbor. “Their U.S. engineers have a high level of capability, but Honda also has these very expert engineers back in Japan to ensure the U.S. team succeeds.”
“The U.S. is the largest market for it,” Iwamura said. “It has a well-experienced, capable development team, and a very efficient, high-quality production team. That made it possible.”
From Ohio, Honda will export the car to Japan, Europe, China and other markets, he said. The company isn’t yet announcing the car’s price, how much it will invest in an assembly line to build NSX or that factory’s precise location.
All Honda plants in Ohio, including engine and transmission factories, will be involved in the project and many components and materials will be locally sourced, Iwamura said.
“Final assembly will be done with a small-scale facility, but including components we need to make use of the current Ohio production base,” he said. “We have to ask suppliers, especially U.S. suppliers, to accommodate our request as much as possible.”
J.D. Power & Associates rated four of Honda’s North American assembly lines among the region’s five best in 2011. The company’s Greensburg plant that opened in 2008 even won a “platinum” rating last year for new-car quality, tying two Lexus plants as the world’s best.
Honda was first among Asia-based manufacturers to open an auto-assembly plant in the U.S., with its Marysville, Ohio, factory in 1982, and added its premium Acura line in 1986, ahead of Toyota (7203)’s Lexus and Nissan’s Infiniti.
In contrast to those two competitors, most Acuras sold in the U.S. are already built in North America, while Lexus and Infiniti count on Japan for most of their lineup.
Including the new ILX, five of seven Acura models sold in the U.S. are made in the U.S. or Canada. Toyota builds only the Lexus RX sport-utility vehicle in North America, and Nissan is preparing to build Infiniti JX SUVs in Tennessee, after previously ending U.S. production of Infiniti models.
Honda may eventually produce its entire Acura line in North America, Iwamura said.
“Seeing the current trend, Acura models could be produced more in the U.S.,” he said. The RL, now the most expensive Acura with a $47,700 base price, may remain in Japan, Iwamura said.
“If there’s a good reason to bring that model from Japan to here, we could do that, but we don’t have a plan -- at this moment,” he said.
Toyota, Japan’s largest automaker, plans to reduce exports from its home-country factories and build up North America as an export base, Yoshimi Inaba, chief operating officer for the region, said in Detroit last week. That may include adding production capacity in Mexico, Inaba said.
Nissan, too, is boosting production at auto plants across the Americas to offset currency-related losses, Bill Krueger, vice chairman for the region, said Jan. 11 in Detroit. The Yokohama-based company’s goal is to get 85 percent of Nissan and Infiniti cars and trucks sold in North and South America from plants in the region, up from 70 percent now.
Honda, which typically sells the highest portion of autos in the U.S. from North American plants among Asian automakers, was already at an 85 percent local production rate in 2011.
For the Acura brand alone, 74 percent of models sold in the U.S. were supplied by regional factories.
The Suzuka plant that made the original NSX is taking on production of low-cost minicars and their small engines, the company said this month. Such vehicles are sold mainly in Japan.
“Suzuka remains the base for next-generation technology,” said Tomohiro Okada, a company spokesman in Tokyo. “Production of these new minicars requires the top technology, in terms of weight and cost savings.”
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