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Honda Moves Forward in Bolstering North American Production with Important Implications

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In late December, we alerted our Supply Chain Matters readers to a major announcement from Honda, namely that this Japan based OEM would shift a major portion of its global production capacity into North America based facilities in the next few years. At the time, we quoted a Wall Street Journal published article indicating that if the plans were fully implemented, North America could potentially account for 200,000 to 300,000 in export auto volumes, representing more than 50 percent of that company’s global production capability. It would imply that Honda’s North American capability would not only serve the domestic market, but would serve as a source of global manufacturing capability.

It appears that as a result on continuing appreciation of the Japanese yen, Honda has now pushed the accelerator on its plans for North America.  A recent Wall Street Journal article reports that the automaker will move forward with plans to expand capacity at several U.S. and Canadian plants and will also construct a new production facility in Celaya Mexico. The WSJ reports that in 2011, Honda exported about 55,000 vehicles from North America to other global markets, and after the new Mexican plant is brought online and other capacity expansion is completed, the export total could rise to upwards of 200,000 vehicles. This would indicate the low end of last December’s plan, but none the less, a significant shift in production strategy.  This move also follows recent announcements from rival Toyota indicating investment in expanded production capacity in the region, including a new sub-compact plant in Mexico. In aerospace, Airbus recently announced its intent to open a new production facility in the U.S., representing a potential bolstering of the U.S. aerospace supply chain.

In December, our Supply Chain Matters takeaway for U.S. readers was that now is the time to hold politicians and industry accountable for actively supporting and shepherding the required investments in world class transportation, logistics and human skills infrastructure that can sustain North America as a global manufacturing hub and a generator of jobs. As firms such as Airbus, Boeing, Honda, Toyota and others place significant added production investments in the region, North American automotive and other supply chains need to be strengthened with more skilled workers and improved transportation and logistics infrastructure. These are opportunities for added jobs, not only in the various final assembly production facilities, but also in the broader supply and value chain network.

In December we sadly observed an environment of Congressional gridlock and extreme partisan politics with opinion polls indicating that the U.S. electorate holding their Congressional legislators in the lowest regards.  Sadly, the gridlock and rancor continues, now flamed on the eve of the Presidential election in November, and a threat of a fiscal cliff looming at the end of the year.

Once again everyone, opportunity does not come often, and when it does, you take action. Economic opportunity and job growth is on the doorstep, but it comes with a resolve. Get involved in the political process and have your voice heard. Demand accountability from political leaders and state intolerance for do-nothing, or slash and burn politics. The U.S. needs to have a strong, world class competitive manufacturing capability and that takes a resolve for all of us.

Get involved in the political process and vote for political leaders who believe in a manufacturing driven economy and world class supply chain capabilities.

Bob Ferrari

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