Honda's Europe problems extend beyond market slump, analysts say
Honda is cutting jobs in the booming UK auto market because it says there are no signs that Europe's car sales slump will end soon. Analysts believe Honda's problems go beyond the slump, especially since rival Nissan continues to add workers and production at its UK factory.
Honda will cut 800 jobs at its plant in Swindon, southern England. It is the first time Honda has cut jobs in the UK since it began car production there in 1992. The restructuring is essential to "meet the new reality of the car market," executive vice president of Honda Europe Ken Keir said in a statement. He said Honda expected weak sales in Europe over the next three years. In 2012, European car sales declined for the fifth consecutive year.
Last year Honda's European volume dipped 6 percent to 141,019 and its share slipped to 1.1 percent, according to data from industry association ACEA. That was less than the market's overall sales drop of 8 percent, but far from Honda's peak of 311,743 sales in 2007, when it had a 1.9 share, according to ACEA data. That was the last year Honda was profitable in Europe.
Little help from new models
Industry watchers say Honda's 2012 sales should have gotten a boost from the launch of an updated Civic compact and the all-new CR-V medium SUV, both built in Swindon.
"They are still losing volume with a very young mainstream model range in the form of the Civic and the CR-V," IHS Automotive senior analyst Tim Urquhart told Automotive News Europe. "The somewhat conservative styling of the Civic is not helping it stand out in the market or appeal to new customers."
IHS also believes workers hired for the launch of the CR-V had to be laid off because of the SUV's weaker-than-expected sales. A traditional leader in the medium SUV market, the CR-V is now battling against cheaper rivals such as the Nissan Qashqai, said Mark Norman, head of automotive intelligence at UK price guide CAP.
"The big marketplace for crossovers in the UK is sub-20,000 pounds (25,000 euros)," Norman said. "Honda is competing at 25,000 pounds, and there you've got Audi and BMW."
In 2012, Honda sold 37,738 CR-Vs in Europe while Nissan sold 218,755 Qashqais, according to data from market researcher JATO Dynamics.
Honda protected UK manufacturing jobs after the financial crash in 2008 by shutting Swindon for four months. Back then, Honda expected the European market would bounce back, which it did because of government-funded subsidies in many countries. Honda doesn't expect another sales surge.
Nissan rising; Toyota no cuts
In contrast to Honda, Nissan's UK factory continues to grow. Last year, Nissan for the first time surpassed annual production of 500,000 in Sunderland, where it makes the Qashqai, Juke subcompact crossover and Note small minivan.
Late last year, the company announced plans to build the new Infiniti compact at the factory in northeast England. This will result in 250 new jobs being added to the 6,000-person work force and increase production by 60,000 a year starting in 2015.
Like Honda, Toyota sold fewer cars in Europe last year as its volume declined 2 percent to 514,840 compared with 2011.
Toyota, however, won't reduce staff at its factory in Burnaston, central England. "We're happy with the number we've got," Nick Freeman, assistant general manager of Toyota Motor Manufacturing UK told Automotive News Europe. "Europe is our major market so obviously we'll keep a close eye on it. The key difference is that we've just launched the new Auris compact so we have some insurance."
Last year Toyota's UK factory, which also makes the mid-sized Avensis, built 109,502 cars, down from 128,146 in 2011. The factory capacity is 182,000, Toyota said.
Honda's Swindon factory, which also builds the Jazz subcompact, increased production last year to 165,607 from 97,459 in 2011, according to the firm's Web site.
That is below the factory's maximum capacity of 250,000 and far from its 2008 production peak of 230,000. Swindon's 66 percent capacity use rate is also below the 75 percent to 80 percent level industry experts say is needed for a factory to break even.
You can reach Nick Gibbs at firstname.lastname@example.org.