Global slump forced Honda closure

February 27, 2020

Following a meeting with Honda Cars Philippines, Inc. president and general manager Noriyuki Takakura on February 24, Trade and Industry  Sec. Ramon Lopez confirmed that the closure of the Honda car production facility in the countrywas mainly triggered by the global slowdown caused by the US-China trade war, followed by the current Covid-19 issue.

The market slowdown forced companies like Honda to rationalize their global operations, optimizing the allocation of their resources.

"It was clarified that the closure of operations in the country was a global decision by Honda HQ and Philippine operations were not involved in the decision to close the facility in the country," said  Lopez.

"The reason they cited was a global slowdown in the automotive industry, coupled with a more competitive market with more players. This forced any company to consolidate and select operations with least cost and with a more favorable market position and volume of operation,” he added.

Honda's rationalization, which began last year, started in the UK, Turkey, Argentina and Mexico. These would affect more countries as Honda continues to rationalize the distribution of their resources and their operations worldwide.

HCPI has been facing challenges in keeping cost competitiveness, producing only 8,000 units per year of the City and BR-V models, as compared to Honda Thailand producing over 200,000 units annually.

The closure of the assembly plant in Laguna would affect the jobs of 387 employees, but other offices such as automobile sales and after-sales services would continue through the Asia and Oceania regional network.

The Trade nad Industry chief said "there are many new players in the auto industry in the country that definitely resulted in greater competition for auto makers. This development offers new possibilities for alternative car assemblers in the country, especially those which will realize the need to diversify production resources".

Despite the closure of HCPI, the sale and production of Honda motorcycles would not be affected as it is handled separately by Honda Philippines, Inc.

HPI is currently the number one motorcycle manufacturer in the world, with PH among its top markets for motorcycles.

Lopez said  “the motorcycle business is the segment that is growing for Honda. This shows that Philippines is a strong market for the products and price points of Honda motorcycles”.

"With regard to cars, we are studying the imposition of safeguarding duties on car imports and will make sure that ongoing investigations regarding this will not be delayed," the DTI chief  added.

Introducing other measures to support local vehicle manufacturers is being eyed after HCPI  announced to close its operation  next month.

“We really have to study the need to impose safeguard duty and other measures to provide at least a level of support to the local assemblers,”  the DTI chief said.

He  admitted that since there is no tariff protection on imported vehicles, it becomes a cheaper alternative for car companies that find it challenging to keep up with the costs in operating in the country.

“Vehicle imports have been growing, causing injury to local industry, from assembly to the local parts supply network in the country,” he said.

Malcanaang also tried to minimize the impact of HCPI’s decision.

The shutdown of HCPI’s Laguna plant would create just a “minimal” impact on the economy, Malacañang said.

Presidential Spokesperson Salvador Panelo expressed confidence that the country’s robust economy would not slow down due to HCPI’s decision to close its production plant.