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Honda relies on virtual factories to cut costs

Manufacturing costs in England are among the highest in Europe and the reputation of British vehicles is often seen as poor. But Honda says that it can make a buck and turn out a high quality car with the English-made $17,500 Civic Si hatchback due here in early 2002.

2001 Management Briefing Seminars index
Here's why: Honda's new system of "virtual factories" reduces cost and improves quality, said Koki Hirashima, chief of Honda of America Manufacturing Inc. When Honda changed from the old generation of the Civic to the new one last year it also changed the factories in Japan, the United States and Great Britain. Each has the same assembly line layout and uses the same robot welders, tools and jigs, Hirashima said at the Management Briefing Seminars here on Wednesday.

This helps keep costs low and increases productivity. Instead of retooling for a new model, Honda re-programs robots and trains assembly line workers, said Hirashima.

On sending the small, high-performance hatchback to the United States, Hirashima said: "It will be a profitable, high-quality model or we would not have made the decision." Prices will top out at $20,000 for a fully loaded model. Honda built the previous Civic Si model at its Marysville, Ohio, factory.

Hirashima said automakers with flexible factories that can tailor output to suit markets around the world will avoid overtime, incentives and shutdowns. He said Honda's strategy is to view capacity on a global basis and match its worldwide resources with the needs of local customers.

The decision to source the Civic Si from the Swindon, England, plant was made because that factory is running below capacity, he said.

You can reach Richard Truett at rtruett@crain.com

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