Honda-The Power of Dreams
Summary of 2006 Year-End CEO Speech
--- Accelerate our effort to strengthen the core characteristics that make Honda unique and proactively pursue creation of advanced technologies and products that represents the uniqueness of Honda ---

TOKYO, Japan, December 19, 2006– Honda Motor Co., Ltd. announced that it would further accelerate its effort to strengthen the core characteristics that make Honda unique in each business area in order to continue creating new value and providing products and services which are beyond customers’ expectations. Toward this end, Honda will steadily make progress with plans and initiatives in the following three areas, which Honda first announced in May.



1) Establishing advanced manufacturing systems and capabilities
2) Strengthening the foundation for overseas growth
3) Accelerating Honda’s effort to reduce environmental footprint


Estimated 2006 Worldwide Sales
Honda expects to achieve all-time record sales in all three product areas.
  Motorcycles: 12.7 million units (up 3% from 2005)
  Automobiles: 3.55 million units (up 5% from 2005)
  Power Products: 6.4 million units (up 15% from 2005)


Automobile Business in Japan
· 2006 sales forecast: 700,000 units (down 2% from 2005).

· Ever since the three domestic sales channels were integrated into a single network in March this year, sales of mini-vehicles as well as models which had been sold exclusively by each channel have increased. Honda recognizes this increase as a result of sales channel reform which was carried out to maximize customer joy and satisfaction. 

 
· In spring 2007, Honda will launch a new model which offers new value for the customer by integrating the design and mobility of an SUV and the functionality of seven-passenger seating. In addition to the introduction of this new vehicle, Honda is planning to further strengthen the appeal of its products.

· For its mini-vehicle business, Honda will further strengthen its collaboration with Yachiyo Industry Co., Ltd. to develop highly competitive products and to strengthen Honda’s overall business capabilities in this category.


Motorcycle Business in Japan
· 2006 sales forecast: 350,000 units (down 5% from 2005).

· In 2007, Honda will continue leading the industry in both environmental and safety performance by making progress in installing fuel injection system to scooters sold in Japan and by introducing the Gold Wing equipped with an air bag.  

 
· Honda will further strengthen the foundation of its motorcycle business and continue promoting the attractiveness of motorcycles by increasing the number of “Honda Dream” dealerships, which meet the diverse needs of customers, from the current 81 sites to a network of more than 100 sites by the end of 2007.


Establishing Advanced Manufacturing Systems and Capabilities
<Concept of the New Automobile Plant in Yorii>
1) By achieving the world’s top level of resource/energy efficiency, Honda will build a “resource/energy-recycling Green Factory” which will reduce the amount of CO2 emitted per automobile produced by 20% compared to the level of 2000.

2) The Yorii Plant will be a state-of-the-art plant which will respond quickly to diversifying customer needs by employing high quality and highly efficient production and logistics systems.

3) The Yorii Plant will be a people-friendly plant where every associate will be able to fully demonstrate their unique characteristics and skills, fostering world-class experts and creating an environment where every associate feels joy and pride in their work.

    
<Building a New Engine Plant>
· Demand for fuel efficient automobiles is growing faster than expected in every part of the world. Taking this into account, Honda has decided to build a new engine plant in Ogawa, Saitama, near Yorii, prior to the production start of the Yorii automobile plant in order to establish production systems and capabilities that will enable Honda to respond flexibly to increases in demand.

· The annual production capacity of this new engine plant will be approximately 200,000 units. Honda plans to begin production at the new plant in summer 2009. Advanced engines produced at this plant will be supplied to Honda auto plants inside and outside of Japan. Related investment for this engine plant is expected to be approximately 25 billion yen, with employment expected to be approximately 500 associates.

 
<Strengthening Motorcycle Production>
· In order to further advance our technologies and know-how in the production of motorcycles of all sizes and to strengthen our system to evolve such technologies and know-how to other Honda plants around the world, Honda will concentrate all domestic motorcycle production to Kumamoto Factory with a target schedule by the end of 2009.

<Strengthening Automatic Transmission (AT) Production>
· At Hamamatsu Factory, we will further strengthen production of automatic transmissions, where demand is growing on a global scale. Especially, the production of transmission gears which require a high level of manufacturing technologies will be strengthened so that Honda will handle major portion of the increased production volume in-house in the future.

<Strengthening R&D Capabilities>
· In addition to the reorganization of Honda’s R&D structure which was carried out in April this year, Honda will build a new R&D center in Sakura, Tochigi targeted to begin operation in 2009.


Strengthening the Foundation for Overseas Growth
<Automobile - North America>
· 2006 U.S. sales forecast: 1.51 million units (up 3% from 2005, an all-time record for the 10th consecutive year).

· 2007 U.S. sales plan: 1.56 million units (up 3%from 2006)

· An all-new Accord will go on sale in fall 2007. In addition, a concept model for the all-new Accord Coupe will be revealed at the North American International Auto Show in Detroit in January 2007.

· The design concept model for a next-generation sports car, which will represent the Acura brand, will be revealed at the North American International Auto Show in Detroit in January 2007.

· In summer 2007, the Acura Design Center, currently under construction, will open in Los Angeles.

· Beginning in spring 2007, production of the Civic will be expanded by adding production at Plant 2 in Canada to the current production of Civic in Plant 1 in Canada and at the East Liberty Plant in Ohio.

· In fall 2007, the Honda plant in Mexico will begin production of the CR-V.

· A new auto plant in Indiana and a new engine plant in Canada are scheduled to begin production in 2008.

<Automobile - Europe>
· 2006 sales forecast: 310,000 units (up 8% from 2005, an all-time record for the third consecutive year)

· 2007 sales plan: 350,000 units (up 13% from 2006)

 
· Sales of the all-new CR-V will begin in January 2007, and Civic Type-R is planned to go on sale in spring 2007.

· At the end of 2007, production at the UK plant will reach 250,000 units annually making full utilization of the plant’s production capacity. Combined with the capacity of 50,000 units at the plant in Turkey, Honda’s total annual auto production capacity in Europe will be 300,000 units.

<Asia>
· To accommodate growing demand for motorcycles in the region, Honda expanded motorcycle production capacity in India, the Philippines and Pakistan in 2006, and further capacity expansion is planned in countries such as India and Vietnam in 2007.

· 2006 automobile sales forecast: 320,000 units (up 4% from 2005, an all-time record for the 4th consecutive year)

· 2007 automobile sales plan: 360,000 units (up 13% from 2006)

· Annual automobile production capacity in India will be doubled to 100,000 units by the end of 2007. With a plan to introduce a small-size vehicle and construction of a second auto plant, Honda aims to produce and sell more than 150,000 units of automobiles in India by the end of 2010.

<South America>
· Honda will expand annual production capacity of its motorcycle plant in Brazil from the current 1 million units to 1.35 million units in early 2007, and further to 1.5 million units by the end of 2007.

· Honda will double production capacity of its automobile plant in Brazil to 100,000 units by mid-2007.

<Automobile - China>
· 2006 sales forecast: 320,000 units (up 23% from 2005, an all-time record for the 7th consecutive year since its’ local production started)

· When Guangzhou Honda’s second auto plant became operational in September 2006, Honda’s total automobile production capacity in China reached 530,000 units including production at export plant.

· The export plant, Honda Automobile (China), which produces Jazz for European markets will fully utilize its annual production capacity of 50,000 units by spring 2007.

· A new company, which will manufacture and supply transmissions and other engine components to Honda plants in China, will become operational in spring 2007. With this, Honda will further strengthen local automobile production in China.

· Guangzhou Honda began study toward the establishment of an automobile R&D center for further business growth.


Strengthening Honda’s Commitment to Reduce its Environmental Footprint
· With new technologies such as advanced VTEC and VCM for automobiles and “super-low friction engines” for motorcycles, Honda will achieve further improvement of fuel efficiency and cleaner tailpipe emissions .

· Application of hybrid technology will be expanded to a smaller size vehicle. Honda will offer a new dedicated hybrid vehicle in 2009 at a price level lower than the globally popular Civic Hybrid.

· Application of diesel technology will be expanded to a medium-to-large size vehicle. Honda will introduce “super-clean diesel engine” that will meet the stringent U.S. Tier‡UBIN5 emission standard, which reduces exhaust gas emissions to a level equal to a gasoline engine, in the U.S. market within the next three years. Honda will consider introducing this engine in Japan as well.

· In November this year, Honda began sales in Brazil of automobiles equipped with a flexible fuel vehicle (FFV) system, which enables gasoline engine-based power plants to operate on a wide range of ethanol-gasoline fuel mixtures between 20% to 100% ethanol.  The Civic FFV went on sale in November and the Fit FFV in December.

· As for the development of technology which will more efficiently produce ethanol from stems and leaves of plants such as straw, an experimental plant will be built within Honda’s Fundamental Technology Research Center in Wako in 2007 in order to work toward establishment of the mass-production technology of bio-ethanol in the future.

· Compact, a home-use cogeneration unit, which has been sold roughly 40,000 units in Japan since its introduction in 2003, will be sold in U.S. from next year. (the first home-use cogeneration unit to be sold in the U.S.)

<Solar Cell>
· A new solar cell subsidiary, Honda Soltec Co., Ltd., was established earlier this month. This company will begin full-scale sales of solar cells when mass production begins at the new plant in Kumamoto in fall 2007. Through production and sales of environmentally-friendly and sustainable energy, Honda will further contribute to the effort to prevent global warming.

<Fuel Cell >
· A mass production model based on the technology and design of the FCX Concept will become available for lease sales in 2008 in Japan and the U.S.

· As for hydrogen generation technologies, Honda will further advance the Home Energy Station which produces hydrogen from natural gas, as well as the solar cell based Hydrogen Station, which Honda has already begun testing in the U.S.

Honda will continue to be the leader in the effort to reduce its environmental footprint by accelerating the company’s commitment and challenges to reduce CO2 emissions through innovation of engine technologies and production of clean energy.  


HondaJet
· Honda has been receiving far more orders than the annual production plan of 70 units. With a plan to deliver the first HondaJet to a customer in 2010, Honda is making progress in determining the location for a production plant in the U.S. and establishing a high quality sales and service network.

· In addition to the HondaJet, the HF120 Turbofan engine which was developed by the joint venture company GE Honda Aero Engines LLC, will be installed to the Spectrum Aeronautical’s “Freedom” which will go on sale in 2010.  Honda will also be providing fuel efficient and highly competitive advanced engines in the world of aviation.


Motor Sports
F1:
· Honda achieved a much-awaited victory in Hungary Grand Prix in August.  For the 2007 season, Honda wants to meet fans’ expectations by winning the top spot on the winner’s podium more often and competing for the constructor’s title.

· Honda will strongly support the Super Aguri F1 Team by providing highly competitive engines again in the 2007 season.

· Through Mobilityland Corporation, Honda will continue negotiating toward hosting an F1 race again at Suzuka Circuit.


IRL:
· Starting with the 2007 season, the IndyCar race engine will shift to 100% ethanol fuel.  Honda will support the U.S. motor sports culture by providing environmentally-friendly and highly competitive engines to traditional open-wheel racing which has fans all over the U.S.


WGP:
· For the top motorcycle road race series of MotoGP, Honda will aim to win the triple-crown for the second consecutive year with a new machine, the RC212V. 


Renovation of Suzuka Circuit:
· Honda will renovate Suzuka Circuit with the goal to achieve the further evolution of mobility and motor sports.

· A major refurbishment of the Traffic Education Center will take place, to re-open in summer 2007. With this center, Honda will contribute to achieving a safer and richer mobility society.

· In addition, the pits and paddocks on the race course will be overhauled. As one of the top-class racing circuits in the world, Suzuka Circuit will continue to host various international races and foster young racers. Through such activities, Suzuka Circuit will continue providing dreams and excitement to many motor sports fans.

Honda will further strengthen the core characteristics that make Honda unique and continue taking on challenges in the creation of advanced technologies and products that represent the uniqueness of Honda to accomplish our goal to provide our customers with even greater joy and excitement.