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Last Updated: Thursday, 13 October 2005, 13:11 GMT 14:11 UK
Honda UK raises its global importance
Analysis
By Jorn Madslien
BBC News business reporter

Honda's decision to design and manufacture the new Civic in the UK is testimony to the global importance of its Swindon operations.

Honda worker at the Swindon factory
Every single new Civic model will be built in Swindon

"This is the only Honda specifically designed for Europe, and the only factory where Honda will produce this Civic is here in Swindon," Ken Keir, Honda UK's managing director, tells BBC News.

This is a notable change from the previous Civic model, which was made in 13 factories around the globe.

The Civic has been around for 30 years and already accounts for a third of all Honda sales worldwide. The eighth generation Civic should significantly raise its share of sales and as such it will be a key driver for the future of Japan's third largest carmaker.

"For Honda's European operation, this is the most important launch in its history," says Honda Motor Europe president Shigeru Takagi.

Turning heads

When the new Civic was first shown as a concept at the Geneva motor show in March, the motoring press was awestruck, and following its formal launch at last month's Frankfurt show the car was hailed as the trump card that would help transform conservative Honda into a fashionable player offering cutting edge technology and design.

Honda Civic on display at the Frankfurt motor show 2005
The new Civic caused a stir when it was unveiled

Not only is the daringly drawn Civic lower, shorter and narrower than its predecessor; it will also be dearer when it goes on sale in January.

Priced from 12,685 in the UK for the basic 1.4 litre S model to 18.100 for the top-of-the range 2.2 litre EX, the car aims to hoist Honda into upmarket segments where profit margins are higher.

Industry observers are convinced the car maker has got it right.

"Honda is likely to strengthen its competitiveness in the global markets and improve profitability over the immediate term, backed by its ability to develop products that meet changing demand," says the credit rating agency Moody's Investors Service. Late last month Moody's raised the carmaker's outlook from stable to positive.

British driver Jenson Button racing for BAR-Honda
Honda hopes British driver Button can help build its image

Honda also hopes its deeper involvement in Formula One motor racing and close links with racing driver Jenson Button will aid the Civics' image among the young and fashionable.

Earlier this month, Honda acquired British American Tobacco's 55% majority stake in its F1 racing operation, following a fresh ban on tobacco advertising in the sport - a move that gave Honda complete control of its Formula One team.

"Basically, it will be 100% Honda from 2006," says Honda operating officer Hiroshi Oshima. "We want to race as Honda and we want to challenge for the championship."

Rising profits

Honda's Swindon-factory has been making Civics and other models for 13 years, and despite the strength of the pound the models have been exported to mainland Europe, the US and even Japan.

Honda's 4,000-strong workforce has produced 1.5 million cars at its two Swindon production lines since 1992, and the company has invested 1.33bn over the years, with no financial assistance from the UK government.

During that period, production has risen from less than 30,000 cars-a-year to 193,000 this year, and hopes are high that the new Civic should push volumes above 200,000 cars per year.

Swindon is also the headquarters of Honda's European operations, an increasingly important source of earnings and growth for the Japanese giant.

Both profits and turnover have grown by about 10% per year over the last decade, making Swindon the most profitable car plant in the UK. In the year to March this year, Honda UK's operating profits comfortably topped 100m.

Takeo Fukui, president of Honda Motor
Honda continues to invest in hybrid cars

Honda is also doing well internationally. Between April and June, Honda Motor's global operating profits rose 6.5% to 170bn yen ($1.5bn; 850m), largely thanks to strong sales in Japan and the US.

Europe's contribution should grow sharply, as the new Civic is expected to spark a 50% rise in sales in the UK and mainland Europe.

As a result the company estimates operating profits to jump to 665bn yen and net profits to hit 470bn yen by the end of the financial year in April 2006.

Green technology

Key to Honda's ability to stay ahead of the competition is its leading position in the development of green technology, according to Moody's.

Honda's sprawling factory in Swindon
The sprawling Swindon operations are crucial for Honda

Honda pioneered the development of hybrid engines, which combine petrol and electric motors, and it is now investing heavily to repeat this success with the development of fuel cell technology.

The company is also maintaining its lead over laggard competitors by working hard to cut costs and improve the efficiency of its hybrids.

Honda sold 106,200 hybrids between their launch in 1999 and April this year - but sales are expected to soar as helped by surging oil prices.

Sales of the Civic hybrid are set to reach 28,000-a-year in the US alone.

The Accord hybrid should add a further 20,000 or so sales in the crucial North American market, which so far has accounted for almost 90% of Honda's hybrid sales- although Europe and Japan are expected to start catching up.

It seems there are few reasons for Honda's Swindon staff to fear the future.


SEE ALSO:
Honda starts work on new UK Civic
13 Oct 05 |  Business
Honda workers get 4.3% pay rise
11 Mar 05 |  Wiltshire
Honda boosts UK investment
10 Sep 01 |  Business


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