Honda needs more time to turn around Europe business
Profit target won't be reached for another 3 years
GENEVA – Honda will need more time to turn around its European business.
"We want to be profitable within three years, by 2016," Honda Europe President Manabu Nishimae told Automotive News Europe at the auto show here this week.
Last year, Nishimae said Honda would be profitable in Europe starting in its 2013-2014 business year. The Japanese automaker has not made money in Europe since 2007.
Nishimae blamed the delay on weak cars sales in Europe, where he expects total volume to decline as much as 10 percent.
"The downward trend is going to continue for two years," he said.
Europe's economic troubles also were cited when Honda announced in January that it would cut 800 jobs at its car assembly plant in Swindon, England. Nishimae said 90 percent of Swindon's production goes to Europe.
Last year, Honda's European volume dipped 6 percent to 141,019 and its market share fell to 1.1 percent, according to data from industry association ACEA. Honda's decline was less than the market's overall decrease of 8 percent, but far from the carmaker's peak of 311,743 sales in 2007, when it had a 1.9 share, according to ACEA data.
Honda Europe boss Nishimae sees Europe car sales falling by as much as 10% in 2013.
Nishimae expects the arrival of new product to spark Honda's turnaround.
"By 2016 we will have the new Jazz subcompact and new [Jazz-based] small SUV, as well as the NSX supercar, which arrives in 2015."
Until then the company will try to avoid losing additional sales and market share by concentrating on what Nishimae called its "pillar models," the UK-built Civic compact and the CR-V medium SUV. "We are trying develop derivatives of those two models, as many as possible," he said.
At the Geneva show, Honda revealed a concept previewing a wagon version of the Civic, which launches in Europe in early 2014, as well as a two-wheel-drive CR-V powered by the firm's new, UK-assembled 1.6-liter diesel.
The launch of the new diesel will help the company reduce the number of parts imported from Japan, where the strong yen reduces profit margins. Many components for the firm's only other diesel, a 2.2-liter unit, come from Japan, Nishimae said.
"We expect the 1.6 to account for around 30 percent to 40 percent of Civic sales across of Europe," he said. That would reduce the 2.2-liter engine's share to 20 percent. Honda's remaining sales will comes from the UK-built 1.8- and 1.4-liter gasoline engines.
European components now account for 60 percent of the UK-built vehicles, a number that Nishimae wants to increase to 80 percent within two years.
No small SUV for Swindon
Nishimae said Honda's new Jazz-based subcompact SUV, which was previewed by the Urban concept in Detroit this year, would not be built at Swindon for European sales.
"We are investigating where is a good place, maybe Asia or Mexico," he said.
Swindon production of the Jazz subcompact for the UK market will stop in 2015, likely resulting in continuing undercapacity for the plant. The factory has a capacity of 250,000 but last year built 165,607 cars, according to Honda data.
Nishimae said sales of the new CR-V, launched late year, are strong and Honda is targeting 40,000 units across Europe for 2013.
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