Thursday, May 22, 2008

Honda decides to buy more foreign made auto parts

To make its products more competitive in the market and reduce the production cost, Honda Motor Company Limited (TYO: 7267) Japan’s second largest automaker, announced that it will buy auto parts from abroad. On Wednesday, Honda also declared to reform its manufacturing processes to boost efficiencies. The new production standards and procedures will be introduced at the company’s Yorii car plant which is now under construction. Reuters reports:

"The issue is how much of the rest of the components, which account for 80 percent of the total, we can procure globally," he said in a group interview. That would include components made overseas by Japanese parts makers as well as those made by local firms, he said.

"For motorcycles, the (parts) infrastructure is in place in Thailand, China, Vietnam and many other places, so we're able to do this. Achieving the same with cars is going to be key."

The company raised the portion of foreign auto-parts from 5% to 17% for its Fit subcompact car. Honda's president, Takeo Fukui said that they were supplying technology to their joint venture partners in China. Another Japanese automaker, Nissan Motor Company (TYO: 7201) is also bringing in parts made from China, India.

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