May 21, 2001
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In remarks made on Friday, May 18, Honda Motor Co. President & CEO, Hiroyuki Yoshino, said that the new Honda V-5 Grand Prix racebike will debut at Catalunya on June 16.<BR><BR>The relevant portion of Yoshino's speech, made during Honda's mid-year press conference in Tokyo, follows:<BR><BR>"In order to further enhance Honda's corporate image in Europe, we also plan to build on Honda's longstanding ‘racing spirit' by becoming even more actively involved in racing activities. This includes the World Grand Prix series, in which we recently attained an unprecedented 500 victories - as well as the Superbike, Trial and other race series. As for technological challenges, we plan to introduce the V-5 four-stroke engine for the World Grand Prix in an event at the Catalunya Circuit in Spain on June 16--commemorating the achievement of our 500th victory. Along with Formula 1 Grand Prix auto racing, we will make every effort to further enhance Honda's motorsports image in Europe."<BR><BR>The complete text of Yoshimo's remarks follows:<BR><BR>"One year ago, I first explained to you Honda's business direction for the next four years leading up to the fiscal year ending March 31, 2004. Also, in our year-end message in December 2000, I provided you with an explanation of Honda's proactive approach based on the new concept of ‘Made by Global Honda.' The goal is to optimize production and parts procurement on a global basis - including what we call our Global Product Supply Network - by drawing on new engine and platform strategies and our New Manufacturing System.<BR><BR><BR>"Today, following the review and projection of our global sales performance, I would like to focus on future strategies for Honda's European operations as one of our significant business challenges, with a particular focus on Honda's new engine technologies, which remain at the core of our business.<BR><BR>"Looking Back At Fiscal Year 2000<BR><BR>"In May 2000, we set our global sales targets for fiscal year 2004 based on our three product divisions - 7 million units for motorcycles, 3 million units for automobiles and 6 million units for power products - for a grand total of 16 million units. Now, I would like to review our progress toward this objective during the last fiscal year, which was the first year toward achieving these targets.<BR><BR>"Reviewing first by product line, in our motorcycle business, sales increased by 15.4% compared with the previous fiscal year, with increases in Asia and North America contributing primarily to achieving total sales of 5,118,000 units.<BR><BR>"In our automobile operations, our strategy of focusing local production operations on local customers paid dividends. Sales of the Stream and Odyssey models were especially brisk in Japan, helping to achieve a total of 776,000 units, an increase of about 10% compared with the previous fiscal year. In North America, sales of locally produced models continued to grow, including the Canadian-built Acura MDX and Honda Odyssey, and the Acura TL and CL made in the US, with the continued strength of the Accord and Civic. Record sales in North America amounted to 1,346,000 units, an increase of 6.8% compared with the previous fiscal year. With substantial increases in unit sales also experienced in Asia, the global sales total for automobiles reached 2,580,000 units an increase of 4.3% for the fiscal year.<BR><BR>"In our power products business, sales totaled 3,884,000 units, a drop of 4.3% compared with the previous year. This was due largely to a decline in sales of generators, general-purpose engines and other products following strong demand in the previous year related to anticipated ‘Y2K' issues.<BR><BR>"Overall, the considerable increase in sales of motorcycles and the steady sales increase for automobiles more than made up for the decline in power products sales, and total sales grew to 11,580,000 units, an increase of about 620,000 units over the previous year. We believe that this is, on the whole, a successful first year toward the plan for fiscal year 2004.<BR><BR>"Looking at our business by region, combining all three product categories, we achieved steady growth in Japan, South America and Asia, in addition to North America, which continued to be a strong market for us. To this point, we were able to make firm progress toward becoming more self-reliant in every global region, except Europe, rather than remaining too dependent on our North American operations.<BR><BR>"Regarding sales targets for this fiscal year, our goal is to achieve 5.68 million units for motorcycles, 2.71 million units for automobiles and 4.62 million units for power products, for a total of approximately 13 million units. Again, the significance for Honda is not simply the record sales number, but the fact that we will make 13 million new Honda customers worldwide.<BR><BR>"As a result of our sales increase and ongoing efforts to strengthen our corporate cost structure together with a more favorable currency exchange rate, we now think it is possible to achieve record revenue and net profits in this fiscal year, two years ahead of the original schedule.<BR><BR>"European Operations<BR><BR>"Focusing now on our European operations, we experienced significant losses in the previous fiscal year. Various factors account for that financial performance, such as a weak Euro, weak sales due to pricing issues in the UK, poor sales in Continental countries, and, as a result, a decline in the capacity utilization of our factory in the U.K. However, we are confident that we can make considerable improvement in profitability during this fiscal year by introducing a number of new products, increasing the capacity usage ratio of the factory, improving the manufacturing cost structure, and the continued restructuring of the sales network.<BR><BR>"We introduced the all-new Civic late last year. And sales of the Civic have been improving. In April 2001, Civic sales increased by approximately 15% over the same month in the previous year. For new products, sales of the Stream began in April. This model became a major hit in Japan and received a positive response from journalists during a test-drive event held recently in Germany. The Civic 3-door will be added to the lineup this fall, joining the Civic 5-door, which is currently being rolled out to the entire market.<BR><BR>"In addition to these models, the new CR-V and a new small car model, which I will discuss later, will be launched within this fiscal year.<BR><BR>"On the manufacturing side, our second factory in the UK will begin operations this summer, raising our total annual production capacity in the UK to 250,000 units. We will soon increase production volume toward this expanded capacity by starting exports of the all-new U.K.-built Civic 3-door to both the Japanese and North American markets and the export of the all-new U.K.-built CR-V to North America. In this way, we also expect our U.K. factory to gain a new sense of maturity as part of Honda's Global Product Supply Network.<BR><BR>"Further, we have decided to shift production of the next generation European Accord from the U.K. to Japan. The production volume of that model has been much smaller than the U.S. Accord in North America. By combining production responsibility in Japan for the Japan and European versions of Accord, we can increase the competitiveness of the product through further cost reduction. This strategy also will allow our U.K. plant to focus on production of models based on Honda's Global Compact Platform--including the Civic series and CR-V--achieving lower new model investments and higher production efficiency. This strategy further demonstrates the flexibility and efficiency gained through our New Manufacturing System and Global Product Supply Network.<BR><BR>"New Engine Technology for Small Cars<BR><BR>"Now, I would like to turn to our first major topic today -- the development of a second ‘next generation' gasoline engine designed for a new small car being developed as a global benchmark for a number of the world's small car markets. This new small car model is also expected to be a major contribution to our automobile business in Europe.<BR><BR>"As we previously announced, based on our long-standing leadership in the development of advanced internal combustion engine technology, we are currently in the process of renovating our gasoline engine line-up on a global basis. We have developed the next generation ‘i-series' engines, which achieve a reduction in CO2 through improved fuel efficiency and a reduction in emissions, while offering advanced performance to maintain Honda's fun-to drive heritage. The<BR>first of these i-series engines, the ‘i-VTEC' engine, was first introduced in Japan in the Stream and the new Step WGN. Versions of this ‘i-VTEC' engine will next be installed in the new Integra, the Acura RSX for the North American market and the Civic 3-door.<BR><BR>"For the second engine of the ‘i-series', we have developed a next generation 1.3-liter engine, which is light, compact and optimal for small cars. We have named this new engine the ‘i-DSI' engine--standing for Dual & Sequential Ignition. While ‘i-VTEC' engines achieve a high level balance of power and fuel efficiency, the ‘i-DSI' engine can best be described as an engine that pursues the ultimate compactness and fuel efficiency for small cars.<BR><BR>"In this new ‘i-DSI' system, we thoroughly addressed the theory of combustion, which is the basis of all conventional engines. Two spark plugs are used for each cylinder in the newly designed, compact combustion chamber. The use of intelligent technologies optimizes the ignition timing of each spark plug for every speed range in response to engine revolutions and load, helping to achieve quick combustion. Combined with a high compression ratio, the engine achieves a higher output with less fuel consumption compared to conventional engines.<BR><BR>"While creating a fun to drive and user-friendly experience, when combined with Honda's Multimatic S CVT, the engine achieved the world's highest fuel efficiency level of 23km per liter (54.1 mpg). Further, we also achieved a substantial reduction in emission levels, and the engine is expected to attain the grade level of ‘excellent low-emissions engine', based on the Japanese<BR>standard. With a considerable reduction in size and weight, the engine also contributes to expanding cabin space in a small car.<BR><BR>"Significantly, this next generation ‘i-DSI' engine will be installed in the new small car models to be launched first in Japan next month, followed by launches in overseas markets such as Europe and Asia beginning in early 2002. The small car model to be launched in Japan next month will be a 5-door hatchback, but we plan to add various new models based on the newly developed ‘Global Small Platform.'<BR><BR>"We remain convinced there is a strong global future for small cars. In advanced countries, we expect an expansion in the small car market because of a heightened environmental consciousness and a market trend toward increased demand for easy-to-use, personal types of cars for daily life. At the same time, in developing countries, the spread of motorization has raised expectations for affordable small cars.<BR><BR>"Capitalizing on Honda's strong tradition in developing small cars, we are determined to pioneer new markets around the world including Japan and Europe, in the small car category.<BR><BR>"Diesel Engine Strategy<BR><BR>"The other main topic I want to discuss today is our strategy for diesel engines in Europe. In European countries, discussions about environmental issues tend to center around the problem of global warming. As a result, the market share of vehicles equipped with diesel engines has been rapidly rising, with their high thermal efficiency and low CO2 emission levels. The tax systems introduced in various countries have helped to provide an advantage to diesel fuel, and this is believed to be contributing to the expansion in sales of diesel-powered vehicles.<BR><BR>"For instance, the percentage of diesel-powered vehicles among new passenger car sales in Germany reached 30% last year, a twofold increase in just five years. The ratio of diesel car sales already exceeds 50% in some countries, including France and Spain. And with diesel's advantages in large displacement engines, the ratio of diesel-powered vehicles is higher in the so-called C and D categories, particularly in such countries as France and Spain.<BR><BR>"Under such circumstances, we decided on the following strategy regarding diesel engines. First, the Civic for the European market will be equipped with the newly developed 1.7-liter diesel turbo engine manufactured by Isuzu Motors Limited, with production of completed vehicles to begin in November 2001 at our U.K. plant.<BR><BR>"As background, we concluded a basic agreement at the end of 1999 with General Motors Corporation concerning the mutual supply of engines, including diesel engine supply from Isuzu. We have been working on the details of this agreement with Isuzu since that time, and, today, I am happy to report that we have just signed a formal agreement for the diesel engine supply.<BR><BR>"Specifically, the Civic model manufactured in the UK factory for the European market will be equipped with the 1.7-liter diesel turbo engines manufactured at Isuzu's plant in Poland. The annual sales target for vehicles with the new engine is approximately 15,000 units.<BR><BR>"This engine type is not currently on the market. Rather, under the terms of the agreement, Isuzu specifically developed this new engine for Honda to be installed in the Civic. With a common-rail injection system and DOHC turbo, the engine has an output of 100 horsepower. Further, with high fuel efficiency and low-level emissions, we believe this will be a very competitive engine.<BR><BR>"While we have been working with Isuzu for the diesel engine for Civic, Honda has been continuing efforts in developing our own diesel-engine technologies. This represents our challenge to explore new technology as the world's leading engine manufacturer - with a wide variety of engines for motorcycles, automobiles and power products.<BR><BR>"In September 1999, just prior to the Tokyo Motor Show, we introduced the prototype of Honda's own diesel engine, which was highly evaluated for its quietness and excellent driving performance. Since that time, we have continued on our own research efforts focused on 2-liter class diesel engines using lightweight aluminum cylinder blocks.<BR><BR>"Based upon this research, we will now continue on to the development stage of this engine, with plans for installation in the next generation European Accord in 2003. For this development effort, Honda and Isuzu reached a further agreement in which Isuzu will offer its expertise as a noted maker of diesel engines in support of Honda's development activities.<BR><BR>"We will make full advantage of this relationship with Isuzu to target the development of a highly competitive diesel engine for the next generation--utilizing Honda's unique engine technologies and know-how.<BR><BR>"In summary of these new development activities, we plan to enhance our product appeal in Europe by:<BR><BR>"--Introducing the 'i-DSI' gasoline engine with the ultimate combustion efficiency in the B car category, where the ratio of diesel-engine vehicles is less dominant.<BR><BR>"--Introducing the 1.7-liter Isuzu-made diesel engine and the 2-liter class diesel engine, based on Honda's own diesel technology, to the C and D categories where the ratio of diesel-engine vehicle sales are higher.<BR><BR><BR>"Strategy for Motorcycle and Power Product Business in Europe<BR><BR>"Thus far, I have focused on our plans for reinforcing our automobile business in Europe. But we also plan to strengthen our entire European operations by taking advantage of our unique position with two other substantial business operations - motorcycles and power products.<BR><BR>"Regarding our motorcycle business, we will first make efforts to enhance our product lineup. Specifically, we plan to be aggressive in offering our customers new products, including several new or re-designed large-size motorcycles, an expansion in the lineup of mid-size models--mainly for locally-produced models--and the launch of new scooter models, which is a growing segment. In total, we plan to launch about 25 models by the end of fiscal year 2004-- including several locally developed models.<BR><BR>"At the same time, we plan to apply the New Manufacturing System for motorcycles, which has already been implemented in Japan. These measures are to be applied to our two local production plants in Italy and Spain. By achieving a more efficient and flexible production system, we aim to increase the capacity utilization of each plant.<BR><BR>"Through these efforts, we aim to raise the ratio of locally manufactured vehicles among total motorcycle sales in Europe to 60% from the current level of 50% by fiscal year 2004, thereby improving our resilience against foreign exchange rate fluctuations.<BR><BR>"We will also begin to supply European markets with inexpensive, small-displacement motorcycles from plants in developing countries, starting at the level of several tens of thousands of units per year. In short, we plan to make improvements in the competitiveness of our motorcycle operations in Europe by capitalizing on Honda's Global Product Supply Network.<BR><BR>"In order to further enhance Honda's corporate image in Europe, we also plan to build on Honda's longstanding 'racing spirit' by becoming even more actively involved in racing activities. This includes the World Grand Prix series, in which we recently attained an unprecedented 500 victories--as well as the Superbike, Trial and other race series. As for technological challenges, we plan to introduce the V-5 four-stroke engine for the World Grand Prix in an event at the Catalunya Circuit in Spain on June 16--commemorating the achievement of our 500th victory. Along with Formula 1 Grand Prix auto racing, we will make every effort to further enhance Honda's motorsports image in Europe.<BR><BR>"As a result of these various efforts for Honda's motorcycle business in Europe, we have set our fiscal year 2004 sales target at 450,000 units--an increase of 30% compared with fiscal year 2001. Importantly, we aim to achieve not only an increase in unit sales, but further growth in the significant profit potential of our motorcycle business in Europe.<BR><BR>"Finally, I would like to address our power product business in Europe. Last year's sales of 1.269 million units in Europe represents roughly one-third of our global power products sales, demonstrating that this is a very important market for Honda. We will now redouble our efforts for achieving the unit sales target of 1.6 million by fiscal year 2004.<BR><BR>"Just as with our motorcycle business, our efforts are well under way for the expansion of local production of power products worldwide, and we will further enhance these efforts in Europe. Specifically, we plan to expand the production of general-purpose engines in Italy, and we plan to begin local production this year of new walk-behind lawn mowers and hedge trimmers in France. These plans will increase the ratio of locally manufactured products among total power product sales in Europe from the current 30% level to the 40% level, to further enhance our resilience to foreign exchange rate fluctuations.<BR><BR>"We will also strive to improve production efficiency, such as greater synchronized engine production in Italy with manufacturing of completed products in France. At the same time, we will establish a more efficient logistics system through various efforts including greater concentration of inventory centers.<BR><BR>"Today, I have focused primarily on our business strategies in Europe and our latest engine technology strategies. We consider that our business in Europe is currently the top-priority challenge facing Honda. By adopting these strategies and optimizing the total performance of our three product businesses--motorcycle, automobile and power products--we plan for our European business to return to profitability in fiscal year 2003. We believe that further strengthening our position in Europe will enable us to fulfill Honda's long term strategy of establishing self-reliant, yet complementary operations in each global region."