Honda committed to Thailand as flood-hit plant restarts

Sat Mar 31, 2012 7:18am EDT

1 of 4. Hiroshi Kobayashi, president and chief executive of Asian Honda Motor Co Ltd, poses at a sedan line production at Honda Automobile in Rojana Industrial Park, Ayutthaya province, about 80 km (50 miles) north of Bangkok March 31, 2012.

Credit: Reuters/Sukree Sukplang

AYUTTHAYA, Thailand, March 31 - Honda Motor Co (7267.T), Japan's third-largest car maker, officially resumed production on Saturday at its plant in Ayutthaya in Thailand, which was forced to close for almost six months after severe flooding last October.

Pitak Pruittisarikorn, executive vice-president for Honda Automobile (Thailand), told a news conference the plant should produce 150,000 vehicles in the remaining nine months of 2012 and the target was for output of 240,000 per year.

"Thailand remains the most important production base in Asia and Oceania. We want to reassure you that Honda is not moving its production base to anywhere else," he said.

Earlier this month, it announced was investing $337 million in a new plant in Indonesia, but Hiroshi Kobayashi, president and chief executive of Asian Honda Motor Co Ltd, said that did not mean it was neglecting Thailand.

"Regardless of the floods, Thailand's market is still increasing. Thailand's demand is still increasing, so is India's and Indonesia's, so why do we have to reduce production here?" he said.

Analysts say Honda will probably need more production capacity in Thailand in the next few years after it added the entry-level Brio hatchback to its line-up last year.

Thailand is a key base for companies in the car and electronics sectors in particular, and their global supply chains were disrupted by the floods that forced seven huge industrial estates to close last year. Less than half of the affected plants have reopened, according to government data.

Honda was the hardest hit of the car firms. Japanese rivals Toyota Motor Corp (7203.T) and Nissan Motor Co (7201.T) were able to resume production by the end of 2011.

On March 27, Japanese business daily Nikkei reported that Honda planned to build another automobile factory in Thailand, probably in the southeast of the country where the risk of flooding is lower.

Honda executives said on Saturday there were no such plans at this time.

"Initially we want to focus on full recovery for the Ayutthaya factory," Pitak said. "But if in the future there's a necessity, then we'll have to decide."

Big firms are increasingly interested in neighboring Myanmar, which has rapidly emerged from isolation after a civilian government took office a year ago after decade of military rule. Western governments may start to lift sanctions if elections on April 1 are deemed free and fair.

Kobayashi said it was too early for Honda, but it could be interested.

"In the future, yes. But it would probably be more for the production of motorcycles. We've just started research. Depending on circumstances, if they are ready, we will go."

(Editing by Alan Raybould and Ed Lane)