Honda's engine plant in Alliston, Ont.Deborah Baic/The Globe and Mail
Supply of the Honda Civic, the best-selling passenger car in Canada for the past 13 years, will be "severely restricted" for the next several months as Honda Motor Co. Ltd. slashes production in Alliston, Ont., in a move that will ripple throughout the Canadian economy.
Amid a shortage of parts from earthquake-battered Japan, Honda will trim output of cars and crossover utility vehicles in Alliston, about 90 minutes northwest of Toronto, to three days a week - a cutback that arrives just as the spring selling season heats up and the auto maker introduces a redesigned 2012 model-year Civic.
"While dealers will continue to receive product, supply will be severely restricted with limited availability of certain models," Honda said in a statement Monday. In addition, the launch of the redesigned CR-V crossover model will be delayed one month and there is likely to be "very limited supply" of vehicles imported from Japan such as the Fit subcompact, Insight hybrid and Civic hybrid, as well as two Acura cars.
The announcement is a blow to the Canadian manufacturing sector, which is still recovering from the historic downturn in auto production in 2008-09. Bank of Nova Scotia economist Carlos Gomes said cuts by Japan-based auto makers in Canada will reduce economic growth in the second quarter by half a percentage point. Industry analyst Dennis DesRosiers has reduced his forecast for overall Canadian vehicle sales because of the decline in Civic production and a limited supply of other vehicles from Japan-based auto makers.
Those forecasts underline how crucial the Civic is in the Canadian automotive market and, in turn, how important the auto industry is to the Canadian economy. With production at normal levels, the economy would be expected to grow by about 2.7 per cent this quarter, Mr. Gomes said. With the Honda slowdown and previously announced production cuts by Toyota Motor Manufacturing Canada Inc., Scotiabank is now forecasting growth of about 2.2 per cent.
While Honda employees will continue to be paid - except for one day in May and two days in June - the cut in production means reduced purchases of materials and will cascade through the auto parts industry to direct and indirect suppliers.
Mr. DesRosiers, meanwhile, expects sales to be flat this year at 1.557 million vehicles, compared with an earlier forecast of 1.6 million.
Potential Civic buyers will hold off if the cars they want are not available, Mr. DesRosiers said, so the sales aren't lost permanently or even shifted in large measure to other auto makers, but will be made up in the fourth quarter of this year or the first quarter of 2012.
"Because vehicles are so well-built, [consumers]can wait out the market," he said.
But the competition in the compact segment is tougher than it has been for several years, with new entries from Ford Motor Co. and General Motors Co., as well as existing strong products such as the Hyundai Elantra and the Mazda3.
Civic sales soared 39 per cent in March, allowing it to vault back into top spot as the best-selling passenger car in the country, according to monthly data compiled by Mr. DesRosiers' company, DesRosiers Automotive Consultants Inc. of Richmond Hill, Ont. Honda sold 57,501 Civics in Canada last year.
The Toyota Corolla grabbed second spot, followed by the Chevrolet Cruze, Elantra and Mazda3. The Ford Focus was in eighth position.
But Honda has strong customer loyalty and Civic buyers are particularly loyal, said Chris Travell, vice-president of automotive research for consulting firm Maritz Research.
Electronics parts such as microprocessors, condensers and diodes are in short supply, as are some rubber parts and some plastics and paint materials, said Richard Jacobs, a spokesman for Honda Canada Inc.
"Recovery from this crisis is difficult and constantly evolving - most notably the challenge of obtaining a few key components required to maintain production at appropriate levels," John Mendel, American Honda Motor Co. executive vice-president of sales, said Monday in a memo to dealers of the company's luxury Acura line.
In a separate move, Honda said its Alliston plant will add production of the CR-V crossover next year.
Production of the Acura MD-X luxury crossover will be shifted to a plant in Alabama in 2013.
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AUTO JAM
Vehicle production by Japanese auto makers in Canada suffers as parts remain in short supply after the March 11 earthquake and tsunami.
Toyota
Plans to close its two Canadian assembly plants for the week of May 23 and its U.S. plants the week of May 30, following shutdowns from April 15-25.
Toyota Canada monthly production of vehicles:
Jan: 51,193
Feb: 41,768
March: 39,579
For March through June, Toyota's Cambridge, Ont., facility (Corolla, Matrix, Lexus RX 350) will lose an estimated 31,891 units of production due to announced cuts, while the Woodstock, Ont., plant (RAV 4) will lose 16,693, according to J.D. Power
Honda
Expects shortages of the Civic and other models as it cuts production through the summer. Normal production may not resume until the end of the year.
Honda Canada monthly production of vehicles:
Jan: 25,087
Feb: 23,245
March: 18,683
For March through June, Honda's Alliston, Ont., facility (Civic, Acura CSX, MDX, ZDX) will lose an estimated 13,125 units of production due to a 50-per-cent reduction, according to J.D. Power.
Source:Japan Automobile Manufacturers Association of Canada, J.D. Power