Honda is No. 1 Asian automaker in US

While its sales may lag behind auto giants Toyota and Nissan in the Japanese home market, Honda has become the leading Asian automaker in the United States. With sales totaling 693,515 vehicles last year, it is, in fact, this country's No. 4 nameplate, just behind General Motors, Ford, and Chrysler. By 1990, Honda officials forecast, their US sales will climb to 1 million cars a year.

Under the current year's voluntary quotas - which expire at the end of April - Honda is allowed to import just 425,000 vehicles. And Tetsuo Chino, president of American Honda, says he does not expect any increase in those quotas for at least another year.

But even if quotas are eventually rolled back, he promises, that nearly 50 percent projected sales growth will not mean any increase in imports by Honda.

``Whatever increase we can achieve in marketing cars in the United States will come from production in the United States,'' says Mr. Chino, who heads the US marketing subsidiary for Honda Motors of Japan.

Honda was the first Japanese carmaker to erect an American assembly plant. The facility, in Marysville, Ohio, went into production in late 1982, producing a few hundred cars a month. Since then, there have been several expansions of the factory, and by 1988, Marysville will be able to roll out as many as 360,000 Accord and 4-door Civic models a year.

Chino says it is ``highly logical'' to assume that the company will either expand its existing plant even further or build a second US assembly line. Many transplants in operation

Honda is by no means the only Japanese carmaker looking to get around the quotas, increasing US sales by assembling vehicles in the United States.

Shortly after Honda began production in Marysville, Nissan opened a sprawling factory complex in Smyrna, Tenn. Toyota operates an assembly line in Fremont, Calif., as part of a joint venture with General Motors, and it is building a factory of its own in Kentucky. Mazda will soon begin producing cars at a factory in Flat Rock, Mich.

In fact, every Japanese carmaker has now committed itself to building at least one assembly plant in the US or Canada by the end of the decade. Some of these will be joint ventures, as with GM-Toyota and the Chrysler-Mitsubishi plant going up in Bloomington/Normal, Ill. Others will be used to supply both the Japanese carmaker and a US affiliate, as with the Mazda plant, which will see half its output carrying the Ford nameplate.

Honda officials insist they are expanding their production base in the USfor relatively altruistic reasons; that it is their philosophy to build cars in the markets where they are sold.

Analysts add that at the very least, several other factors have seriously influenced decisions made by Honda and its Japanese rivals.

For one thing, they note, there has been heavy political pressure on the Japanese to hold down their imports, while the Japanese want to expand sales in their most profitable market.

Under the current quotas, the combined imports of all Japanese manufacturers can come to no more than 2.3 million cars.

``I think there'll be some kind of restrictions'' for several more years, says C.D. Mahin, group vice-president for Subaru of America, the US importer of cars built by Fuji Heavy Industries of Japan. Fuji recently announced plans for a plant built as part of a joint venture with Isuzu Motors in Indiana. Dollar-yen shift favors the trend

Another key factor is the dramatic shift in the relationship between the dollar and the yen. Over the past year and a half, the yen has gained roughly 40 percent in value.

``Our best estimate ... is that at about 160 yen to the dollar, the production costs in a plant like Honda's in Ohio are about the same as they are in Japan,'' says Michael Luckey, an analyst with Shearson Lehman Brothers. ``And if the dollar were to move somewhat lower, then the US could actually have a slight cost advantage.''

By comparison, plants on the Japanese mainland had as much as a $2,500-per-car production cost advantage before the dollar began its slide.

A third important factor is that the Japanese have discovered with the right blend of modern technology and progressive labor-management policies that they can produce vehicles in the US that equal or even surpass the quality of Japanese-made products.

They also result in far lower labor costs. The GM-Toyota plant in Fremont, for example, has barely half the work force - about 2,500 hourly employees - of a comparable GM plant.

This change is a clear concern for the United Automobile Workers Union, because domestic carmakers are beginning to demand the same sort of flexibility found in Japanese transplant plants.

Yet if the union goes along with more-flexible work rules, it is in danger of losing thousands of jobs. But if the union does not go along, US auto manufacturers may be forced to ship more work offshore in order to remain competitive with Japanese manufacturers operating in this country.

``We know these changes are coming in the way we work,'' says UAW vice-president Marc Stepp, who heads the union's Chrysler Department. ``Some changes that are going to come about are going to be very painful, but either we do it, or face more adversity.''

The UAW has another concern. So far, only the Fremont plant is unionized. Workers at Nissan and Honda have rejected the union's organizing overtures, and while Mazda's factory in Michigan is expected to be organized when it opens, it is unclear whether the UAW will be invited in by any other Japanese automakers. Critics hit imported parts

The UAW is not the only critic of these Japanese transplants. Last week, the president of Ford Motor Company criticized the Japanese for relying primarily on imported components at these US assembly plants, rather than American-made parts.

On the average, more than half the parts in the vehicles built at these plants come from Japan, South Korea, Mexico, or other foreign suppliers, prompting Ford president Harold Polling to term the vehicles ``hidden imports.''

``The voluntary restraints should be reduced below 2 million units to equate for the units being produced in the United States that have 50 percent or less domestic content,'' he suggested in a speech before the Detroit Economic Club.

While it is unlikely the voluntary quotas will be reduced, the Japanese are likely to pay close attention to Mr. Polling's remarks, particularly with the shift to a trade-minded, Democratic Congress.

Honda has already taken a major step toward mitigating Polling's complaint. The automaker recently announced its intention to expand its US operations by building all the engines, transmissions, and other drive-train components used at its Marysville plant at another Ohio factory.

That will bring Honda's total investment in its US automotive operations to $1.2 billion. It will also give the company the highest degree of domestic content of any Japanese carmaker - about 66 percent by 1990.

But most industry analysts expect that as they did with US assembly lines, the other Japanese carmakers will follow Honda's lead and begin building US component plants over the next five years.

In fact, some of these analysts say, the dollar-yen shift would make it foolish for them not to.

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