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Thai floods force all-new Civic switch to Japan

Back to Japan: Honda's new Civic will arrive on time in March - but from Japan, not Thailand.

Flood-hit Honda forecasts modest 40,000 sales in 2012 as production shifts to Japan

25 Nov 2011

HONDA Australia has confirmed it will source its vital next-generation Civic sedan from Japan to meet its launch target in March next year in the wake of the Thai floods disaster that has crippled 80 per cent of vehicle supply to the local operation.

Without knowing when production will resume from the flooded factory in Thailand, the company is also looking to its Suzuka factory in Japan for supplies of other key models such as Jazz while Honda gets its devastated Thai operation back up and running.

Honda also will increase marketing efforts and promotion of its Japanese-sourced vehicles, the Odyssey people-mover, Accord Euro sedan and Insight hybrid hatch – starting with a discounted price for its updated MY2012 Odyssey – as part of its bid to keep dealer throughput at sustainable levels.

These arrangements were detailed at this week’s Honda CR-Z hybrid coupe launch by recently appointed Honda Australia director Stephen Collins, who is on a mission to restore sales volume to the record-breaking 60,529 units achieved in 2007 over the next few years, starting with a “modest” target of 40,000 units in 2012.

The brand has been slower than most to recover from the sales slump caused by the global financial crisis and had planned to sell 45,000 cars this year, up 11 per cent from 40,375 in 2010, but forecasts have now been revised down to 30,000 – a 25.7 per cent reduction and its worst year since 2003.

“We are not happy with this result and frankly it is a year we would all like to put behind us,” said Mr Collins.

In a cruel irony for a brand priding itself on planet-friendly hybrid technology, Honda was hit with the full force of mother nature this year in a double-whammy of natural disasters with the March 11 earthquake and tsunami in Japan followed more recently by major floods in Thailand.

The Japanese quake disaster caused a six-month production stoppage in Japan, which had the knock-on effect of a three-month delay from component-starved Thailand – not to mention Honda's R&D facility in Tochigi being extensively damaged by the 8.9-magnitude quake.

15 center imageFrom top: 2012 Honda Civic sedan, Honda Jazz, Honda Odyssey and Honda director Stephen Collins.

Mr Collins said Honda Australia was planning to rebuild volume for the final quarter of this year as supplies returned to normal in September, but then the Thailand foods hit, rendering its factory inaccessible and destroying hundreds of brand-new cars awaiting shipment from the surrounding holding yards.

However, Mr Collins remains optimistic, encouraged by Japan's quick recovery and the hope that lessons learned from that will help Thailand do the same.

“Despite the devastation, Honda R&D recovered quickly and we are very proud to say, kept the global launch schedule of several key models, a mammoth achievement given the circumstances,” he said.

“I expect we will be feeling the impact of supply constraints into the first quarter of next year. Our challenge will be to regain our share in competing segments once production normalises, and I am very confident that we can achieve this.” From an Australian perspective, the image-leading CR-Z coupe will arrive in showrooms from December 1, and Honda has already increased advertising for its Accord Euro.

In addition, the company next week will offer a more highly-specified, mildly-facelifted Odyssey with up to $2000 off the list price.

From mid-Feburary the first Japanese-built Jazz models will be marketed as a special edition with more standard equipment, followed in March by the vital ninth-generation Civic – which despite all the dramas, will be launched on schedule.

“There was no way we were going to allow a tsunami, quake or flood to delay the new Civic to this marketplace,” said Mr Collins.

Equally important for Honda is the next-generation CR-V SUV recently unveiled at the Los Angeles motor show, which will reach Australia later in the year, sourced from either Japan or Thailand depending on how quickly the latter recovers from the floods.

The production location of the Thai-built full-size Accord and light-segment City sedan remains under review. Accord production in the US has been hampered by a lack of supply from Thai-based suppliers but the City is assembled in several Asian locations – although sourcing them from those plants raise quality and compliance concerns.

“We are looking where else we can get (the City) short term,” said Mr Collins. “It is made in lots of places throughout Asia, but there are homologation and other issues to fix.” Mr Collins also said sourcing from Japan may cause Honda Australia to take an “early hit” on profitability but is ordering cars in “good quantities” and taking a long-term view to support its dealer network.

“We are happy to re-source whether it is Japan or elsewhere given the current situation but we will go back to Thailand,” he said. “It's just a question of when.” Switching production from Thailand to Japan is not a straightforward process, especially as the cars must continue to comply with Australian Design Rules (ADRs).

“There are definitely no short cuts (to ADR compliance),” Mr Collins told GoAuto. “But (the ADR authorities) have been very co-operative in helping us to fast-track the process.” Should no further natural or global financial disasters stand in its way, Honda Australia will continue to bolster its Australian renaissance in 2013 with the introduction of diesel variants of some models, starting with the UK-sourced five-door Civic hatch.

“This is in response to the growing customer demand for diesel in key segments,” said Mr Collins.

“We are still 100 per cent committed to our strong hybrid line-up but we recognise the market demand for other fuel options, like diesel, is significant.” The Accord Euro is also shares the Civic's critically-acclaimed Honda-developed 2.2-litre turbo-diesel engine in the European market, making it a prime candidate for import, but like the Civic hatch, it is exclusively built in the British Swindon plant, making it a potentially expensive option – although Mr Collins told GoAuto bringing it to Australia is “doable”.

Having recently lost major dealer Rick Damelian in Sydney's inner west – although Mr Collins claims its fall into receivership was a “complex issue” not resulting from disasters – Honda is keen to ensure the survival of its network.

Mr Collins said Honda would “work closely” with dealers, and considers the brand's retail outlets as “second to none in terms of facilities, people and customer satisfaction”.

“We will strive to provide minimum disruption to our customers," he said. “We will prioritise existing orders and are today communicating regularly with our customers on the supply situation.” Asked if Honda anticipated a return to the 60,000-plus Australian sales volume of its 2007 heyday, Mr Collins said he was focussing on 2012 for now but that the brand's message to its dealers is “we want to get back to that level ASAP”.

Some have blamed Honda's slow recovery from the global financial crisis on what is seen as a knee-jerk reaction of spending cuts on new model development, leaving it uncompetitive in a market that has moved forward.

Despite this, Mr Collins believes the company remains “locally and globally very financially sound” and next year's arrival of key new models should help start to turn things around as Honda restores production capacity.

“We have moved globally at record pace to implement a plan for recovery,” Mr Collins said. “I am really confident (because) with the tsunami, the recovery was pretty quick. On the positive side, we will come out of the other end stronger.”

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