Honda announces first new Northern US auto plant of the 21st century

Koichi Kondo, Honda’s North American chief executive officer and president, announced today that Decatur county in Indiana was the big winner in a five location race to attract the first new US automotive manufacturing facility of the young century to be built in the former automotive stronghold of the Midwest.

“We look forward to crossing the finish line together,” Kondo said on a conference call. “I look forward to saying, `Honda and Indiana, start your engines.”’

The new factory will be located near Greensberg, Indiana, and this is extremely welcome news to a region recently hit with huge worker layoffs from the big three US automakers. With automotive manufacturing facilities and jobs being shipped out of the country at an alarming rate in recent years, this represents the first new automotive production facility built in the US Midwest since Toyota opened its plant in Princeton, Indiana in 1998. Honda passed on what could have been more lucrative incentives from Southern states to be nearer to its main North American parts suppliers. Sites in Ohio and Illinois were considered along with Greensburg, which is 49 miles (78 kilometers) southeast of Indiana’s capital, Indianapolis.

Mayor Frank Manus said Honda’s arrival in Greensburg, a town of about 10,500 people, was among his “wildest dreams.”

The new facility, originally expected to cost about $400 million will actually represent a $550 million investment by American Honda. The state of Indiana will be investing around $150 million with $45 million going directly to Honda, another $45 million for roads and infrastructure to support the new facility directly, and the remaining 50-55 million would be invested in new roads and infrastructure to support the expected growth in the area due to the plant.

The facility is expected to be built in about 24 months, and will employ over 2000 workers. Production is expected to be over 200,000 4 cylinder cars a year beginning in the fall of 2008. Akio Hamada, Honda’s North American plant chief, was in Greensburg for the announcement and he explained that the new factory would have “the same type of flexibility found in all Honda plants.”

Honda began making autos in the U.S. in 1982 in Marysville, Ohio, its largest North American factory. Since, it has built assembly plants in East Liberty, Ohio; Alliston, Ontario; Lincoln, Alabama; and El Salto, Mexico.

Honda’s big U.S. sales gains as it expands its model line necessitated a new US plant as Their current North American plants are nearly running at full capacity on increased demand for Civics, (up 20 percent this year), as well as the start of production of  the new CR-V and Acura RDX sport-utility vehicles. The U.S. market, Honda’s biggest, accounts for more than half of the company’s operating income. U.S. sales through May 2006 were up 8.6 percent. Only Toyota, with an increase of 8.8 percent has fared better this year.

The Greensburg plant is part of a $1.46 billion global expansion announced last month that includes a new engine factory in Canada, a car and engine plant in Japan, and enlargements of existing U.S. engine and transmission facilities.

The overall goal of these projects is to give Honda the capacity to build and sell 4.5 million autos worldwide by the year 2010. On April 26, the company announced that it expects global sales of around 3.7 million vehicles in 2006.