Aug. 26 (Bloomberg) -- Honda Motor Co. is making $355 million of upgrades at plants in Ohio where it opened its first U.S. wind tunnel, seeking productivity and fuel-economy gains for models designed and built in North America.
The Ohio projects for Japan’s first company to make cars in the U.S. include $166 million of improvements to its factory in East Liberty and a $64 million stamping press at its Marysville plant, said Ron Lietzke, spokesman for the company’s assembly unit. Honda wouldn’t provide the cost of the wind tunnel or other additions to its engineering center in Raymond.
“The driver of the projects is to improve all our characteristics,” Lietzke said in an interview, declining to say whether the changes will lead to greater output. “If we end up increasing production capacity as a result, that’s fine,” he said, without elaborating.
Honda is refurbishing factories as it prepares to restore full North American production next month after parts shortages triggered by Japan’s March earthquake left Honda and Acura dealers short of models. The Tokyo-based company’s U.S. sales fell 2.6 percent this year through July, and market share shrank to 9.3 percent from 10.6 percent as industrywide deliveries rose 11 percent.
Output at Honda’s auto-assembly plants in the U.S., Canada and Mexico dropped 26 percent to 559,981 through July from 754,807 a year ago, according to company data.
Having opened Marysville in 1982, before Toyota Motor Corp., Nissan Motor Co. and other Asian companies began making cars in the U.S., Honda’s North America engineering and production units are among the region’s most sophisticated, said Jeffrey Liker, professor of engineering at the University of Michigan in Ann Arbor.
“By the most common productivity metrics, they’re among the most efficient,” said Liker, who studies automotive-assembly operations. “They have a history of developing exceptional people and actually keeping them. That allows them to accumulate knowledge and continue to learn.”
The Raymond R&D center, near the Marysville and East Liberty plants, is Honda’s main vehicle-development facility for the Americas. It’s responsible for designing and engineering the Pilot and Acura MDX sport-utility vehicles, Ridgeline pickup, Acura ZDX wagon and TL sedan, and North American version Odyssey minivan, all of which are built only in the region.
Boosting fuel-economy on those models to meet tightening regulations is also its responsibility, Frank Paluch, senior vice present of Honda R&D Americas, said in an interview this month.
Last month, carmakers agreed to double the Corporate Average Fuel Economy, or CAFE, to 54.5 mpg by 2025. The first phase for the industry is to reach a U.S. average of 35.5 mpg by 2016.
“We are very aware of those targets and where our responsibility is for CAFE within the lineup. There are set plans how to meet them,” Paluch said. “By the 2016 model introductions, we’ll target about an 18 percent improvement, specifically for our areas.”
Improvements will come through enhanced engine and transmission performance, lighter-weight materials, and smaller and more-efficient components, said Paluch.
Such “evolutionary” changes were used when Ohio engineers revamped the Odyssey last year, raising fuel economy 17 percent, he said. Hitting the 2025 goal is a “bit more gray,” he said.
“If consumers are buying a lot more hybrids, we can easily meet those requirements,” Paluch said. “If consumers don’t buy a lot more hybrids or don’t buy more battery-electric vehicles, we’re going to have to think about other ways to meet those goals.”
Honda hasn’t previously acknowledged the Ohio wind tunnel that was built in late 2010. It will help engineers improve vehicle aerodynamics for further efficiency gains, said John Dirrig, a manager and chief engineer at the Raymond center.
“The ability to do that type of analysis as early as possible in the development phase of new vehicles is a big deal,” he said.
Toyota, Nissan and Hyundai Motor Co. don’t have wind tunnels in the U.S. Toyota’s Technical Center in Ann Arbor, Michigan, uses one nearby operated by affiliate Denso Corp., said Bruce Brownlee, a Toyota spokesman.
Honda’s is a “half-scale” tunnel, intended for early prototypes.
‘Not Just a Big Fan’
Such a device may cost $25 million, while a full-size wind tunnel is at least $100 million, said Frank Ohlemacher, project manager at the Ohio State University’s Center for Automotive Research in Columbus. “This is sophisticated equipment, not just a big fan,” Ohlemacher said.
Honda won’t say how much it’s invested in Raymond, where more than 1,000 engineers work at desks in a central hall the length of 2.5 football fields, or 750 feet. It also has a crash-test center and laboratories to test electromagnetic interference and the effect of heat, rain and cold on vehicles.
Along with the Ohio upgrades, Honda said in March it’s spending $94 million to modify its Lincoln, Alabama, plant that builds Odysseys and Pilots. This month Honda said it will build an $800 million plant in central Mexico that will make 200,000 small cars a year after it opens in 2014.
Honda’s American depositary receipts, representing one ordinary share, rose 69 cents, or 2.3 percent, $31.30 yesterday in New York Stock Exchange composite trading. Its U.S. unit is based in Torrance, California.
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