Honda to scale back production of Pilots [2.1.6]

[T Mac]

Honda to scale back production of Pilots
Reduction aimed at adjusting inventory

Wednesday, February 01, 2006
MICHAEL TOMBERLIN
News staff writer

Honda said Tuesday it is scaling back SUV production at its Alabama assembly plant by 27,000 vehicles this year in a move that is not expected to affect the plant's 4,500 employees.

Starting in April and continuing through December, Honda plans to reduce the number of vehicles it makes each day in Lincoln to 1,150 from 1,300 - the first time the automaker has significantly scaled back production at its $1.2 billion Talladega County factory.

Honda will reduce only production of the Pilot sport utility as it attempts to adjust inventories on dealer lots and reduce the need for incentives to tempt buyers. Beginning in April, the Lincoln plant will make 350 Pilots and 800 Odyssey minivans per day.

"A key strategy behind Honda's business success has been to match vehicle production to customer demand," said Mark Morrison, spokesman for Honda in Alabama. "At this time, although our overall sales outlook is positive, inventory levels for some models must be adjusted to more closely match current and projected customer demand."

Reversing gears:

Morrison said the cutback amounts to a slowdown on one of the plant's two assembly lines. Without lower production levels, inventories of Pilot SUVs could move to between 60 to 80 days - too high for Honda's liking.

"Typically, Honda prefers to keep dealer inventory supplies between a 45-day to 60-day supply," Morrison said. "When inventories begin to rise, Honda's flexible manufacturing system allows the company to adjust production to keep the right flow of products to the market."

Honda last year made 204,897 Odysseys and 87,792 Pilots in Alabama, for a total of 292,689 vehicles.

Changes in production levels at the Alabama plant have been common since Honda opened it in 2001, but most adjustments have been upward. Such changes are usually not reported to the public.

A reduction of 150 vehicles per day, however, is unprecedented at the plant, which reached full production level on its two lines late last year.

"We are looking to manage our inventories by balancing supply and demand," said Sage Marie, manager of Honda public relations in the U.S. "Fundamentally, we don't want to play the incentives game."

Marie said sales of the Pilot were up in December and Honda will announce today an increase in January. He said the reduction is a matter of controlling inventory levels.

Still, the news comes as a surprise considering Honda officials were publicly talking about expanding production at the Alabama plant as recently as September, when its North American manager, Koichi Kondo, said Honda could build an additional 100,000 vehicles annually there with a minimum investment.

Last year, Honda cut production at its Ontario plant by 3,000 vehicles per day for three months to adjust supply. In addition to the Pilot, the Canada plant produces the Ridgeline truck, which had reached inventory levels of 100 days.

E-mail: mtomberlin@bhamnews.com
[[ Source: Birmingham News ]]