Honda to focus on hybrids, drop microcar plant: report

TOKYO Wed Jul 14, 2010 8:19pm EDT

TOKYO (Reuters) - Honda Motor Co, Japan's No.2 automaker, will drop plans to build a new minivehicle factory and focus on its green vehicles business, the Nikkei business daily reported on Thursday.

Soon after the global financial crisis hit in 2008, Honda had announced plans to delay construction of the Yorii factory, north of Tokyo, and a plant for 660cc minivehicles at subsidiary Yachiyo Industry Co, both originally scheduled to start production in 2010.

Honda had initially planned to build clean-diesel and other fuel-saving vehicles at the Yorii factory, but has since abandoned the development of clean diesel engines, planning instead to come up with a new hybrid system to boost fuel economy on its bigger vehicles.

A Honda spokeswoman declined to confirm the report.

The Nikkei said the Yorii factory would likely begin production in 2013, in line with Honda's latest plan to start in or after 2012.

The paper also said Honda would review its strategy on minivehicles, with a market limited to Japan. Honda, which had earmarked about 50 billion yen ($565 million) to build the minivehicle plant in western Japan, plans to stop developing commercial-use minivehicles to narrow its product line, the paper said.

Honda Chief Executive Takanobu Ito, who took his post about a year ago, has said he wanted to accelerate the roll-out of hybrid cars as environmental regulations tighten around the world. He is scheduled to brief on Honda's medium-term strategy at a news conference next Tuesday.

Honda's shares were down 0.9 percent at 2,717 yen in early trade, in line with other auto stocks and the broader market.

(Reporting by Chang-Ran Kim in Tokyo and Nivedita Bhattacharjee in Bangalore)

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