The dramatic appreciation of the yen has hit many companies, including Honda who doesn’t expect to be profitable in Europe until 2013/2014, when 80% of its car sales will come from its British plant.
The 2011 natural disasters from Japan and Thailand cost the company 22,000 units, which tore a hole in its supply chain. Since imports into Europe make up 40 percent of Honda’s sales in the region, the company plans to reduce this to about 20% as soon as it doubles annual output in its Swindon plant in Britain to nearly 180,000 units in 2012. A second shift of workers will be added beginning with May to one of the two lines at the UK site, where it builds the Civic hatchback and CR-V crossover.
Although the company has already two straight years of annual losses in Europe, it doesn’t want to exit this fiercely competitive market filled with competitors that offer margin-eroding incentives to chase declining volumes.
“The European car market is all about high technology and beautiful design, both for the exterior and interior. So our reputation among European customers affects demand in other regions,” Honda Europe President Manabu Nishimae declared.