Strong Yen Has Honda Considering Additional CR-V Production in North America

Production of the Honda CR-V typically occurs within Japan, but to hedge against currency fluctuations, Honda is reportedly preparing to shift some production responsibilities to its North American factories.

Honda Chief Financial Officer Yoichi Hojo spoke to Bloomberg about his worries of a robust Japanese yen. If it is to strengthen to less than 80 yen to the dollar, as analysts are predicting, Japanese production will no longer become a competitive option, according to Hojo.

A stronger yen directly effects Honda' product plans. It is currently slated to introduce a new version of the CR-V in the third quarter of this year, and increase production to anticipate increased demand for the new model. The CR-V, Odyssey minivan, and Pilot SUV are big sellers for Honda in the U.S., as they are higher margin vehicles. To meet demand on the latter two vehicles, the Japanese automaker will be increasing production at its Alabama plant to 650 vehicles a day.

To quench consumer thirst for the CR-V (sales in January ) while keeping costs down, Honda is looking to shift additional CR-V production to its plants in North America. Presently, production of the compact SUV is handled by assembly plants in East Liberty, Ohio, and El Salto, Jalisco, Mexico. North American CR-V production started with the third-generation model in late 2006, and was ramped up over time to meet customer demand.

That move, however, is easier said than done. Hojo told the Wall Street Journal that North American CR-V production is already at capacity, meaning shifting any additional assembly work stateside will force the automaker to consider expanding factories or building a new facility.

"Our export models are the CR-V and hybrids, but the CR-V is selling well in the U.S. and production of the model is at full capacity (in the U.S.), so we have no choice but to export from Japan," Hojo told the WSJ.

The production shift could occur by the end of the year, when Honda is expected to roll out a revamped version of the CR-V. Should the automaker desire a quicker fix to cutting cost, it could opt instead to increase the use of parts manufactured in countries with low labor costs, including China and India.

Source: Bloomberg, Wall Street Journal

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