Honda roars into the bigger time with $1.88 billion expansion

Honda Motors will invest US$1.18 billion ($1.88 billion) to build its sixth North American assembly plant, its first car factory in Japan in 30 years and an engine plant in Canada, as it lifts production of fuel-efficient cars.

The company will spend US$400 million for the new factory in the US, 70 billion ($1.02 billion) to build its first Japanese factory since 1976 and US$140 million on an engine plant in Canada.

President Takeo Fukui is using record profits to expand in North America, the company's most profitable market. US sales of the Civic model jumped 22 per cent in the four months ended in April as rising petrol prices prompted consumers to avoid light trucks and sport utility vehicles built by General Motors and Ford.

"Honda clearly needs more capacity to meet strong demand for its fuel-efficient vehicles in North America and it's the ideal timing for the automaker to expand after just posting record earnings," said Norihito Kanai, an analyst at Meiji Dresdner Asset Management.

Honda plans 570 billion in capital spending this fiscal year as it expects vehicle sales to rise 9.7 per cent.

Honda is also planning to build a new motorcycle factory in India which can make 450,000 units a year and aims to sell more than 18 million motorcycles globally in 2010.

- REUTERS