The renaissance in automobile manufacturing in the United States has been a great development. While it seemed to be leaving, thanks to lower labor costs and strong international currencies, we’re seeing more foreign automakers build here than ever before. Toyota has recently announced big investments into its U.S-plants, Volkswagen spent $1 billion in Chatanooga and Nissan is preparing to export more vehicles than ever out of Mississippi.
Currency issues are a strong motivator behind this, and Japanese automakers are shifting heavily to North American production. Never is this more clear at Honda, who builds 85 percent of its vehicles in North America. The remaining 15 percent is a big problem though; they’ve announced that they lose money on every imported vehicle they sell.
According to Automotive News, U.S dealers are clamoring for more Fits, Insights and CR-Z hybrids, but the company has limited shipments to try to contain the losses. Fit is a hot-selling product for Honda here and globally. Demand is higher than supply, but Honda isn’t eager to fill it. That’s because demand for the car is hot in Japan as well, where it actually generates a profit. Honda is continuing to bring these cars over, just in limited quantities says Chief Financial Officer Fumihiko Ike. “We need to keep our customer base…..exports will continue just for the sake of our dealers. At least they have something [to sell].” That isn’t a good position to be in.
Ike says Honda’s exports will be decreasing significantly in the near future, and the Fit will be produced in Mexico starting in 2014. Most observers will agree; Honda isn’t in a great place right now. Formerly an industry darling, its latest round of products have shown a decided lack of effort. With the renaissance of General Motors, Ford and Chrysler, along with the rise of Hyundai and Kia, Honda can’t afford to coast. Yet, with products like the current Civic, that is exactly what they have done. Compounding Honda’s problems is a strong Japanese yen. We didn’t’ realize how much of a problem it was until now though. We’ll see how Honda’s next-generation of products fares. Accord is up next, along with a rushed mid-cycle enhancement to the Civic.