Honda gives back

by David Taylor of www.simcoe.com

ALLISTON - When the sirens started their relentless wail on March 11, 2011 along the eastern seaboard of Japan, who could have imagined that a warning signal might also be resonating in a community in Central Ontario 10,000 kilometres away?

Ever since a massive earthquake rocked Japan almost five months ago, the automobile industry has been adjusting production levels. And its effects have been felt here.

While the world watched as Japan suffered and fought to rebuild, the question became: How would it affect the Simcoe region and the close-knit community of Alliston where Honda operates two sprawling production facilities, employing more than 4,000 people?

The Honda of Canada Manufacturing (HCM) facility in Alliston is one of the assembly operations directly affected by parts shortages.

The vast majority of Honda’s parts and materials are sourced here in North America, but Japan is still a critical source.

“A few critical parts continue to be supplied from Japan,” said Honda Canada executive vice president Jerry Chenkin at Honda Canada’s new, eco-driven headquarters in Markham. “At this time, many of Honda’s Japan-based parts suppliers have resumed production and most are functioning at 50 per cent or better capacity.”

Chenkin said Honda is working diligently and closely with the few suppliers that have yet to resume production to re-establish their operations, while also evaluating additional sources for some parts in the supply chain.

However, the situation changes constantly, a fact borne out by twice-a-day conference calls with the worldwide corporate head office and parts facilities in Japan, he added.

HCM in Alliston and other plants around the world have been forced to cut back operations, limiting overall production.

Following the tsunami, workers on the production lines reported for duty and worked on the line for half their normal shift. The balance of their hours was not been cut, though. They performed other work around the plant on a first come, first serve basis. And, during most non-production periods, HCM employees have the option to take time off without pay, cover the time off with vacation, or report to work for non-production activities that might include cleaning and maintenance, additional training, and involvement in a wide variety of projects.

Honda is doing all that it can to insulate their local workers from the effects of the disaster many time zones away.

“Honda remains focused on minimizing the impact to associates and their families, and plans no layoffs at any of its North American facilities,” Chenkin said.

Honda started reducing production at various North American plants at the end of March since their supply chain system, like most in the industry, allows for between 30 and 40 days of uninterrupted production. But the shortage of key parts has grown more acute as the company struggles to resume operations in Japan or find alternative sources for components.

Unfortunately, this necessary move comes at a bad time for Honda.The versatile Alliston plants assemble the Honda Civic (coupe, sedan and Si models), as well as the Acura ZDX, MDX and CSX.

On April 20, Honda launched the ninth generation of the Honda Civic in five different models. For the last 13 consecutive years, the Civic has been the best selling passenger vehicle in Canada.

Production on the 2012 Civic line began back in January in Alliston, and according to sources, 10,000 to 12,000 units should have been ready to ship by launch time.

However, between Canada and the US, some 30,000 to 35,000 Civics are sold in an average month.

For the 2012 model year, Honda will likely be facing greater competition from other Asian-based rivals – specifically the Toyota Corolla, the Hyundai Elantra and the Mazda 3.

Implications felt half a world away
What are the implications for Alliston, Simcoe, Ontario, Canada and even the rest of the world after the earthquake and tsunami in Japan last spring?

Honda Canada spokesperson Richard Jacobs said dealers will continue to receive Civics and other models, but the impact will vary in different regions depending on demand. Jacobs also said it remains unclear if Civic buyers will experience significant wait times for their new models.

“We’re not really sure yet what the extent of the impact will be and when and how much it will be,” he added.

Among other implications, Honda says it will now delay the launch of the new generation 2012 CR-V sport utility vehicle by at least a month. Honda will extend output of the 2011 model. CR-Vs are presently being built for the North American market in Ohio.

Production for this vehicle will shift to Alliston for 2012 – a testament to the value Honda places on the region’s capabilities.

Honda said it would continue to make decisions based on the status of the recovery in Japan and on the stream of parts. However, a parts shortage still remains a concern.

“Honda is making every effort to work toward a full recovery as quickly as possible,” Chenkin said. “We appreciate everyone’s understanding during these challenging times.”

Honda has managed the unprecedented parts supply issues that resulted from the devastating impact of the March 11 earthquake and tsunami in Japan with no layoffs at any of its 14 production plants in North America.

“We are particularly proud of the efforts of our manufacturing team in Alliston,” said Chenkin, “and we applaud them for the steps they have taken to keep our associates working together as a team during this difficult period... We still have challenges to overcome, but once we have normalized operations we will owe them a great debt of thanks.”

Giving back
In recent weeks, with input from associates and HCM management, some employees have even been working offsite, helping out organizations in the community.

Organizations that have benefited from these “volunteer” initiatives include the Alliston and District Humane Society, the Alliston Good Shepherd Food Bank and the Barrie Food Bank.

At the human society, Honda employees have been building an outdoor shelter, cleaning and helping out with the animals. At the Alliston food bank, they’ve been prepping and painting rooms and offices and are on standby for additional work. In Barrie, they’ve been helping move all stored food from the old fire hall to the Food Bank’s temporary location before the move to new centralized quarters on Anne Street – an enormous undertaking.

Lori Van Valkenburg, with Honda, said HCM also provided assistance at the Habitat for Humanity in Alliston.

“Every little bit helps – everyone,” she said. “It’s a winning situation for all involved, including the community and HCM associates. The advantages to everyone are practically immediate – and far reaching.”

As the supply of parts from Japan improves, production will ramp-up in August on a step-by-step, plant-by-plant and model-by-model basis, with production gradually returning to 100 per cent of the original plan in Honda plants across North America – including Alliston ¬– in September.

However, production of the new 2012 Civic line-up will continue at a reduced rate of approximately 50 per cent due to the limited supply of specific key components. Full production is expected to resume sometime in the fall.

Positive turnaround
“We are pleased to see a positive turnaround represented by this significant improvement in our production situation,” said Chenkin. “Throughout this crisis, Honda has been working hard to achieve a speedy recovery, while maintaining a focus on our longer-term plans for continued growth in sales and production in order to meet the growing needs of our customers.”

A review of sales figures for all models and brands sold in Canada in May, June and even July show expected reductions in most models sold. However, the figures may also be a little misleading and the downturn may not all be directed to recent cataclysmic events. There were significant declines in sales pretty much across the board.

A few days ago, the parent company in Japan, Honda Motor Co., Ltd. reported an 88 per cent plunge in first-quarter profits after the earthquake and subsequent tsunami. An overall net profit of $481 million was announced. However, in a sign that conditions are improving, Honda raised its full-year earnings forecast by 35 per cent.

Given the constraints the company had to work through during the reporting period, the numbers are better than expected, analysts said. "I think Honda deserves some credit for the first quarter, in which some expected the firm to post losses," said Naoki Fuiwara, a fund manager at Shinkin Asset Management with head offices in Tokyo, Japan.

Source;
http://www.simcoe.com/news/article/1052194--honda-gives-back