Made-in-Mexico Fit Caps Honda Bid for North America-Built Lineup

Feb 21, 2014 5:26 pm ET

Feb. 22 (Bloomberg) -- Honda Motor Co., following record auto production in North America, opened its seventh auto- assembly plant as the Japanese carmaker seeks to boost sales in the region with locally sourced vehicles.

The $800 million Celaya, Mexico, plant is Honda’s most advanced in the region, designed to curb energy and water use as it builds Fit hatchbacks and a new small crossover, said Ron Lietzke, a company spokesman. It will make 200,000 cars a year, lifting the portion of North American-built autos Honda sells in the U.S. to more than 95 percent, Honda said.

“We have many factories in North America and I think yes, this factory has the most new technologies,” Takanobu Ito, Honda’s president and chief executive officer, told reporters in Celaya yesterday. “In North America we can produce our large vehicles in the U.S. We can produce these smaller vehicles here in Mexico, and we have an optimized location for production.”

Honda was Japan’s first automaker to build cars in the U.S., starting at its Marysville, Ohio, plant in 1982, and has more North American auto-production capacity than in its home market. The Celaya factory, Honda’s second in Mexico, is part of the carmaker’s goal to insulate regional operations from currency swings and supply-chain disruptions that hurt it in 2011 and to better meet local customer demand.

Honda’s expansion in Mexico, including a $470 million transmission factory opening in 2015, coincides with an auto industry surge there. Nissan Motor Co. in November opened a $2 billion plant in Aguascalientes, its third auto-assembly plant in Mexico, and Mazda Motor Corp. marks the opening of its first factory in the country next week.

Saving Energy

Mexico’s President Enrique Pena Nieto also attended the Celaya plant’s official opening yesterday.

Energy-saving features include a stamping press that makes parts with 40 percent greater efficiency; a welding system that needs fewer robots than at conventional plants; and a new vehicle painting process that uses 40 percent less power, Honda said. Low-energy LED lighting is used in the plant and skylights are installed in the roof to further minimize power needs.

Employment at the plant will grow to 3,200 workers later this year, Lietzke said. Another 1,500 people will be hired at the transmission factory, Honda said.

Efforts to boost competitiveness and attract investment from companies such as Honda are “establishing a new framework that makes it possible for Mexico to grow more in the coming years,” Pena Nieto said.

Labor Costs

About two thirds of the parts used to make vehicles at the plant will be supplied from within Mexico, the company said. The factory is Honda’s first in North America designed to make the smallest class of vehicles the company sells there.

Mexico’s lower labor costs help make products built there more competitive, said Tetsuo Iwamura, Honda’s executive vice president and North American chief operating officer.

“The labor cost is different in Japan as is the logistics cost, since in Japan we have to use ocean freight,” Iwamura told reporters. “From those points of view, these are good advantages from producing in Mexico.”

Honda is to begin selling Celaya-built Fits in the U.S. early this year. While Fit sales rose 8 percent to 53,513 last year, it ranked behind General Motors Co.’s Chevrolet Sonic hatchback and Ford Motor Co.’s Fiesta in subcompact sales.

With the new 2015 model Fit, “we definitely do more,” John Mendel, Honda’s U.S. sales chief, said in an interview last month, without setting a target.

Honda built a record 1.78 million autos in the U.S., Canada and Mexico last year. The Celaya plant will give it the ability to make at least 1.92 million annually, the company said.

Honda’s American depositary receipts fell 0.1 percent to $36.14 yesterday in New York, and are down 13 percent this year. Honda’s North American headquarters are in Marysville.

--Editors: Niamh Ring, John Lear