Honda 'would not build car plant in UK today'

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The Independent Online

Honda has admitted it would not build a new car manufacturing plant in Britain today because of the weakness of the euro and the UK's non-membership of the single currency.

Honda has admitted it would not build a new car manufacturing plant in Britain today because of the weakness of the euro and the UK's non-membership of the single currency.

The Japanese car maker also disclosed that it did not now expect its loss-making European operations, including the car assembly plant at Swindon, to return to profit until 2003 - a year later than planned.

Honda lost Â¥18.4bn (£119m) in Europe in the first half of the year, and expects its European car sales to fall by 17 per cent in the current fiscal year to about 208,000. The plunge into losses and the drop in sales was blamed on a near-20 per cent strengthening in the value of the yen against the euro.

Yoshide Munekuni, the chairman of Honda, said the company would "definitely not" build a car plant in Britain if it were looking for a European manufacturing location today. Honda also said it was pressing ahead with plans to shift a third of its UK component orders abroad because of the strength of sterling.

Honda's Swindon plant currently buys £500m worth of components a year, of which 75 per cent come from UK suppliers. This figure will come down to 50 per cent.

As a first step, Honda is increasing the European content of the Swindon-built Civic model from 25 per cent to 40 per cent and urging suppliers to start billing it in euros.

Minoru Harada, the president of Honda Europe, said the strength of sterling was "threatening" all UK-based manufacturing companies and said he would like Britain to join the euro. But he refused to be drawn on the consequences for Honda if Britain was still outside the single currency five years from now.

The Britain in Europe lobby group said Honda's warning showed "the serious problems for British manufacturing caused by sterling's volatility outside the euro. Kitty Usher, its chief economist, said: "If Britain slammed the door on the single currency, as the anti-Europeans want, the damage would be much more severe."

Honda maintained it was still fully committed to the £1bn car plant at Swindon and planned to return it to profitability by accelerating the plan to reach full production capacity of 250,000 units.

Honda is also discussing a widening of its engine alliance with General Motors to allow the GM subsidiary Isuzu to start supplying it with diesel engines for Swindon.

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