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Employees at work assembling engines at Honda's third manufacturing facility in Canada. (Deborah Baic/The Globe and Mail)
Employees at work assembling engines at Honda's third manufacturing facility in Canada. (Deborah Baic/The Globe and Mail)

Thai floods force Honda to halve Canadian, U.S. output Add to ...

For a company whose slogan is “The Power of Dreams,” Honda Motor Co. Ltd. is having a nightmare year.

The Japan-based auto maker, which has barely begun gearing up production at its Canadian and U.S. factories after lengthy and severe disruptions caused by the March earthquake and tsunami, has now been forced to slash output by 50 per cent for the next two weeks because of flooding in Thailand.

The earthquake, tsunami and power crisis, the surge in the value of the yen and now the Thai floods have battered Japanese auto makers and manufacturers, but Honda has been the most affected. And it has been hurt at critical times.

Disruptions caused by the earthquake wrecked the launch of the redesigned Civic compact – the company’s best-selling vehicle in Canada and the country’s no. 1 selling passenger car for the past 13 years – and the floods have upset the second attempt to launch the car by curtailing production in Alliston, Ont., and Greensburg, Ind.

“To put it bluntly, we’re in a really tough spot,” Fumihiko Ike, senior managing officer, said Monday as the company released second-quarter financial results that showed operating profit plummeted 68 per cent.

The company said Monday it will cancel Saturday overtime this month at its six assembly plants in Canada and the United States and will not make any vehicles at all on Friday, Nov. 11.

“A number of Honda suppliers in Asia currently are unable to maintain parts production, which is disrupting the flow of parts to our production operations in North America,” Honda Canada Inc. said in a statement. Components made in Thailand are used throughout Honda’s global manufacturing operations.

Less than two weeks ago, Honda told a news conference at its Alliston plant it was getting set to boost the factory’s production of Civic and Acura crossover models to 1,600 a day. Output has not been at those levels since Honda cut back in 2009 during the recession.

The plan announced in October included making vehicles on two Saturdays each in November and December, mainly to boost production of the Civic. Company officials said they were trying to reduce a 30- to 45-day backlog in orders for the vehicle, which held on to first place in the Canadian passenger car sales race through September. Sales results for October are scheduled to be released Tuesday.

Last week, Honda’s newest assembly plant, in Greensburg, began operating a second shift to crank out more Civic models.

The company suspended production at Honda Automobile (Thailand) Co. Ltd., on Oct. 4 and flood waters inundated the plant four days later.

Honda is the second Japan-based auto maker to cut production in North America because of the flooding in Thailand. Toyota Motor Corp. said Thursday it was suspending overtime this week at assembly plants in Cambridge, Ont., and Woodstock, Ont., as well as factories in Kentucky, Indiana and Texas.

The Japanese government intervened in foreign exchange markets Monday to try to reduce the value of the yen against the U.S. dollar.

Mr. Ike said his reaction was: “Finally, they intervened. But I’m also aware that a solo intervention has a limited impact.”

With a report from Reuters

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