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Monday, 10 September, 2001, 11:30 GMT 12:30 UK
Honda boosts UK investment
Honda car
Japanese car manufacturer Honda opened the first car plant to be built in the UK for eight years on Monday.

The move brings its investment in Swindon to 1.5bn and creates a further 200 new jobs at the new factory, which should produce some 250,000 vehicles a year.

The official opening of the factory comes as a slowing world economy and overcapacity in the global car market is taking its toll on the big car manufacturers.

Honda's UK managing director Ken Keir stresses there is still room for growth in the small car market and plays down fears that euro weakness could harm its UK investment.

Bucking the trend?

About 8% of Honda's cars worldwide will now be made in the UK.

"We are in the fortunate position at Honda where the demand for our product on a worldwide basis exceeds our production capacity. Even in the US economy, we have had a 5% increase this year over last, and a 14% increase in Japan over last year," Ken Keir told the BBC's World Business Report.

"Honda is bucking the trend."

The US market accounts for an estimated 90% of the company's operating profits, and so far is offsetting any weakness seen in its European sales.

US sales have been helped by the weaker yen, which has made its cars cheaper in dollar terms.

"We sell 2.65 million cars a year, we are not one of the very big players, we pride ourselves in products for particular markets where there is still growth," he added.

He said the UK market for small and medium cars is still seeing growth.

Mr Keir attributed the decision to increase production to the UK's stable level of productivity.

"As importantly, maybe more so, the quality of the vehicles has been commensurate with any of our other sources of manufacture" he added.

Vulnerable to euro?

Some argue that opening a second plant on the continent, could leave Honda vulnerable to the euro's weakness against the pound and yen.

Honda will make the new Civic at the plant, exporting it back to Japan and the US.

"They're faced with the situation where they've spent a lot of money on capacity in Europe in the wrong place," Christopher Richter of HSBC Securities said.

Mr Keir refused to be drawn on the euro. "We have experienced changes in exchange rate all around the world... we are fairly confident that it can make a very adequate return in long run."

Earlier this year, Honda blamed the weak euro when it issued a profit warning for its European operations.

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Honda UK managing director Ken Keir
"Honda is bucking the trend"
See also:

27 Mar 01 | Business
Honda blames euro for weakness
22 Nov 00 | Business
Honda 'regrets UK investment'
14 Aug 00 | Business
Japan's other carmaker
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