* Corporate users' rate to be hiked by average 17 pct
* Auto industry says Tepco should first cut costs
* Tepco faces huge clean-up, compensation and fuel bills
* Honda threatens to buy less power from Tepco
By Chang-Ran Kim
TOKYO, Feb 16 Japan's auto industry on Thursday attacked Tokyo Electric Power Co (Tepco) for its plan to hike corporate electricity rates from April, saying the utility should cut its own costs first before passing the pain onto customers.
The struggling operator of the tsunami-hit Fukushima nuclear plant decided last month to raise electricity prices for businesses by an average 17 percent, citing a higher import bill as it shifts to fossil fuel-fired power generation amid public concerns over the safety of nuclear power.
"If you saw the efforts that workers in our factories are making to offset the strong yen and keep manufacturing alive in Japan, you'd see how incredibly difficult this price hike would be," Toshiyuki Shiga, head of the Japan Automobile Manufacturers Association, told a news conference.
"Tepco should make the same kind of effort, and then if they've exhausted their options, we'll listen." said Shiga, who is also chief operating officer of Nissan Motor Co.
He added that he planned to discuss the issue among member automakers to collectively protest the decision.
Japanese automakers are fighting an uphill battle to make profits on cars built for export with the dollar trading around 78 yen, near a historic low.
Worries over the unstable supply and high cost of electricity since the March 11 earthquake last year have added yet another reason to shift car production overseas, along with high corporate taxes and the dearth of free trade deals.
Shiga said electricity accounts for roughly 10,000 yen ($130) of the cost of assembling a car at Nissan, meaning a proposed hike of about 20 percent for the automaker would add about 2,000 yen to the cost of each car.
"And that's not even counting what the parts makers would face," he said.
This month, a top executive at Tokyo-based Honda Motor Co also lashed out at Tepco, saying it could not accept the price hike without a proper explanation.
"So they're going to import more fuel for thermal power. What's the exchange rate they're assuming? How much reserves do they have? What assets can they sell? They've given us no explanation," Honda Chief Financial Officer Fumihiko Ike told reporters, calling the impact on its business huge.
"This is at a time when we're trying to trim 5 yen here and 10 yen there. But we can't just turn around to consumers and say, 'We're going to place a surcharge of 2,000-3,000 yen because electricity prices have risen.' That all has to be shouldered by us manufacturers," Ike said.
He added that Honda would try to buy less power from Tepco and generate more of its own power if the rate hike sticks.
Tepco can raise corporate charges at its discretion and negotiates separate contracts with large customers like Nissan and Honda. Some companies and local governments have threatened to go to smaller providers for their power, but large corporate users have little choice but to accept Tepco's demand because the utility has a near-monopoly in the regions it operates.
Japan's Yomiuri daily reported on Thursday the utility was also considering boosting rates for households by 10 percent from July, although that would require government approval. Tepco said it had not made a decision yet.
Tepco, which needs trillions of yen to clean up after its disaster-struck nuclear reactor and to compensate residents and businesses affected by the crisis, is discussing a controversial bailout by the government.
Public worries have prevented Japan's nuclear reactors from being brought back online after they are shut for routine maintenance, and only three of 54 are now operating. Without approval for restarts, all of them could be shut by the end of April, boosting fossil fuel use and adding over $30 billion a year to the nation's energy costs, according to a government estimate.
($1 = 78.3350 Japanese yen) (Editing by Edwina Gibbs)