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Monday, 14 August, 2000, 14:54 GMT 15:54 UK
Japan's other carmaker
Honda already exports minivans from Canada to Japan
Honda already exports minivans from Canada to Japan
Honda is the smallest of Japan's main car companies, with only 10% of the domestic market, and it has often followed an independent line in contrast to its bigger rivals.

It had a reputation for engineering innovation and for taking decisions that other Japanese car manufacturers would not face.

And it has always depended more heavily on its overseas markets than other Japanese carmakers.

Honda's founder, Soichiro Honda, started as an piston manufacturer, and always had a strong interest in engines. He developed a leading range of motorcycles and marine engines before going into car production.

Honda History
1946: Soichiro Honda founds firm in Tokyo producing engines for bicycles
1963: Honda starts car production
1971: Honda Civic launched
1979: Honda begins collaboration with Rover
1982: Honda opens first US factory
1989: Honda announces Swindon investment and 20% stake in Rover
1994: Swindon expansion as Rover deal off
1998: second plant for Swindon
Honda began producing small cars in 1963 for the Japanese market, but its biggest success came in the United States in the 1970s and 1980s, when it first began its strategy of switching production overseas, building two plants in Ohio and one in Canada.

It became the fourth biggest car producer in the US, making more cars there than in Japan.

Honda's Accord was the best-selling car in the US for a number of years, and its Civic (for the cheap end of the market) and its Accura (at the luxury end) also sold well. The Civic had a revolutionary, low emission engine.

But Honda was a victim of the high yen and the switch of American car buyers to sports vehicles and minivans.

By the 1990s, profits tumbled and there were serious cutbacks at Honda's headquarters in Suzuka in Japan.

Rover alliance

Meanwhile, Honda's preferred strategy of breaching the European market involved close collaboration with Rover after its sale to British Aerospace.

Honda wants to concentrate Civic production at Swindon
Honda wants to concentrate Civic production at Swindon
For 15 years, Honda worked closely with Rover in the UK, and was key to the revival of Rover's fortunes.

It helped the company adopt Japanese-style production methods and shared the in design of the Rover 200 (Ballade) and the Rover 800 (Legend), and the Rover 400 (Concerto).

Honda's initial investment in Swindon came in the wake of its minority 20% stake in Rover.

It started by building engines for Rover cars at the Swindon plant, also making parts for its Rover partner, and only gradually began introducing car assembly work.

But when BMW bought Rover in 1994, it was a major shock - and it was from that point onwards that Honda began a major investment in Swindon.

It announced a 300m expansion of Swindon in that year, with plans to increase its output from 100,000 to 150,000 cars per year.

Honda later added plans to build a second car plant at a cost of 430m and upgrade and expand its engine plant, with the aim of producing 300,000 cars a year.

In 1999, Honda sold 210,000 cars in Europe and 65,000 in the UK. Over half its European sales were from cars produced in Swindon.

Honda has also started to produce its popular sports utility vehicle, the CR-V, in Swindon.

Squeeze on suppliers

But if Honda is committed to its UK production base, it is also aggressive about driving down costs.

Honda was the first Japanese car manufacturer to start cost-cutting in Japan in the 1990s.

It has always emphasised the importance of "flexible working practices" in the UK.

In April, Honda's Paul Ormond told the BBC that it planned some cutbacks in production due to the strong pound.

"No doubt about it, the strength of the pound, in terms of exporting our products into Europe is a factor" in the temporary cutbacks and retooling, he told the Today Programme on 1 April.

Honda's European division lost 60m last year, and is not expected to be profitable until 2002.

So Honda, like Toyota and Nissan, has been trying to squeeze its suppliers, the smaller UK companies that provide 500m worth of parts each year.

It wants to increase the percentage of auto parts coming from continental Europe to 50%, and has also asked its UK suppliers for a 15% price reduction.

This, in effect, is the same policy as Toyota, which wants to invoice its suppliers in euros, forcing them to lower prices if the exchange rate falls.

Unlike Toyota or Nissan, however, which have other European plants or partners, Honda has no choice but to continue its European car production in the UK.

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See also:

10 Apr 00 | Business
Honda boost to UK car industry
14 Aug 00 | Business
Q&A: Honda's UK commitment
01 Apr 00 | Business
Honda slashes UK production
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Strong yen knocks Honda earnings
30 Jun 00 | Business
Sterling threatens Nissan
12 May 00 | Business
Analysis: Europe's car industry
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