News Releases 2007
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CorporateJapanDecember 19, 2007

Summary of 2007 Year-End CEO Speech


TOKYO, Japan, December 19, 2007 – The current fiscal year is the last year in the current 3-year mid-term which began in spring 2005. During the last three years, Honda focused on gaining a foothold for the future, and results of such efforts have begun to show in many areas.

Honda will further accelerate its effort to strengthen the core characteristics that make Honda unique in the areas of research and development, production, procurement, sales and marketing on a global basis, with a focus on the following three pillars:

1) Strengthening the foundation for global growth
2) Strengthening Honda’s effort to reduce its environmental footprint
3) Accelerating efforts in Japan to strengthen the core characteristics that make Honda unique


1. Strengthening the foundation for global growth
[ Motorcycle ]
<Asia Oceania – Motorcycle >
· 2007 sales forecast: 9.5 million units (up 3% from 2006)

· Honda’s cumulative motorcycle production reached 20 million units in India (in January 2007), 15 million units in Thailand (in September 2007), and 20 million units in Indonesia (in November 2007). 

· India – The third motorcycle production plant of Hero Honda will begin operation in April 2008, adding annual production capacity of 500,000 units.

· Vietnam – The second motorcycle plant with annual production capacity of 500,000 units will begin operation in the latter half of 2008.

· With Honda’s fuel injection (FI) and low friction engine technologies, Honda developed a 100cc class motorcycle engine which achieved a maximum 15 percent improvement in fuel economy, increased power output, and lower cost compared to a conventional engine. New models equipped with this engine will be introduced to countries in Asia starting in 2008.

< South America – Motorcycle >
· 2007 sales forecast: 1.53 million units (up 25% from 2006)

· Peru – A new motorcycle plant with annual production capacity of 25,000 units began operation in October 2007.

· Brazil – December 2007, the expansion of annual motorcycle production capacity in Brazil from the previous 1.35 million units to 1.5 million units has been completed. The production capacity is scheduled to be further expanded to 2 million units in early 2009.

[ Automobile ]
< North America – Automobile >
· 2007 U.S. sales forecast: 1.55 million units (up 3% from 2006)

· 2008 U.S. sales plan: 1.59 million units (up 3% from 2007)

· Sales of the all-new Accord are off to a good start, while sales of Civic and Fit remain strong.

· For cumulative sales from January through November 2007, CR-V and Odyssey were ranked as the best selling vehicles within each respective category.

· Annual production capacity of Honda’s auto plant in Mexico was expanded from the previous 30,000 units to 50,000 units in September 2007 concurrent with the start of CR-V production.

· In fall 2008, Honda’s total annual auto production capacity in North America will be 1.62 million units after a new auto plant in Indiana and a new auto engine plant in Canada begin production.

· The prototype of the all-new Pilot will be introduced at the North American International Auto Show in Detroit in January 2008.  

<Europe – Automobile >
· 2007 sales forecast: 380,000 units (up 23% from 2006

· 2008 sales plan: 420,000 units (up 11% from 2007)

· Sales of Civic, CR-V, and diesel models remain strong, and sales in Russia and Central Europe have increased significantly.

· In February 2007, production at the UK plant reached 250,000 units annually making full utilization of the plant’s production capacity. With completion of capacity expansion at the plant in Turkey from the previous 30,000 units to 50,000 units, Honda’s total annual auto production capacity in Europe will be 300,000 units at the beginning of 2008.

· In the first half of 2008, the all-new Accord Sedan and Tourer will be introduced to the market. The mass production models will be introduced at the Geneva Motor Show in March 2008. The all-new Accord will be equipped with an i-DTEC engine, which complies with the Euro 5 emission standard expected to become effective in 2009.

< Asia Oceania – Automobile >
· 2007 sales forecast: 345,000 units (up 9% from 2006)

· 2008 sales plan: 415,000 units (up 20% from 2007)

· India – By the end of December 2007, annual production capacity of the existing auto plant in India will be doubled from the current 50,000 units to 100,000 units. In July 2007, the construction of a new auto plant began (which is scheduled to become operational in 2009).

· Thailand – Cumulative automobile production in Thailand reached the milestone of 1 million units in November 2007. Honda’s local engine parts plant began operation in April 2007, and a plant which produces stamped body panel service parts began operation in September. In addition, Honda’s second auto plant in Thailand will become operational in the latter half of 2008. Combined production capacity will be 240,000 units annually at its full capacity. Increased production in Thailand enables Honda to further strengthen its ability to offer products to the entire region.

· The all-new Accord was introduced first in Thailand in November 2007, then will be introduced to the other countries in the region in 2008.

<South America – Automobile >
· 2007 sales forecast: 118,000 units (up 30% from 2006)

· Brazil – At the end of July 2007, the annual production capacity of Honda’s automobile plant in Brazil was expanded to 100,000 units. Honda decided to further expand the capacity up to 120,000 units by sometime around August 2008.

· In addition to gasoline-base models, Civic and Fit models equipped with a flexible fuel vehicle (FFV) system have been very popular since their introduction in 2006. To respond to increasing demand, Honda will increase the ratio of FFV models for both products.

· Argentina – In November 2007, Honda began construction of a new automobile plant with annual production capacity of 30,000 units (with a plan to begin operation in the latter half of 2009). The new plant will play a key role in Honda’s production network in South America along with the Honda auto plant in Brazil.

< China – Automobile >
· 2007 sales forecast: 420,000 units (up 29% from 2006)

· 2008 sales plan: 490,000 units (up 17% from 2007)

· Sales of City, Civic, CR-V, Acura MDX continue to be strong. The export plant, Honda Automobile (China) Co., Ltd., which produces a product for European markets, began fully utilizing its annual production capacity of 50,000 units in April 2007. Honda’s sales and production are growing steadily in China.

· In March 2007, a new company which manufactures and supplies power train components such as transmissions began operation. Honda has been further increasing local content and improving cost competitiveness.

· In late November 2007, Civic Hybrid sales began. At the beginning of 2008, Honda will introduce an all-new Accord, Honda’s best selling model in China with annual sales of more than 100,000 units.    

[ Power Products ]
· In January 2008, cumulative production is expected to reach 80 million units.

· Sales of Honda’s compact household cogeneration unit is growing steadily with monthly sales of more than 1,000 units, and cumulative sales in Japan exceeded 56,000 units. Sales in the U.S. began spring 2007.

[ Estimated 2007 Worldwide Sales ]
· Honda expects to achieve all-time record sales in motorcycle and automobile business. 
 
Motorcycles:

13.38 million units (up 6 % from 2006)

Automobiles: 3.76 million units (up 6% from 2006)
Power Products: 6.16 million units (down 4% from 2006)


2. Strengthening Hondafs effort to reduce its environmental footprint
< Hybrid >
· In addition to Civic Hybrid, Honda will introduce a new dedicated hybrid vehicle in 2009. The new dedicated hybrid vehicle will be equipped with a newly developed lightweight and compact IMA (integrated motor assist) system and offered at a more affordable price level base on Honda’s efforts to significantly reduce cost. The worldwide sales plan for this vehicle is approximately 200,000 units annually.

· A new sports hybrid, based on the CR-Z introduced at Tokyo Motor Show, will be sold globally. With this enhanced hybrid product lineup, Honda envisions that hybrid models will account for approximately 10% of Honda’s global automobile sales by around 2010.

< Diesel >
· The second-generation i-DTEC engine will first be installed to models for European markets in 2008, North America in 2009, and Japan will follow. 

< Fuel Cell Vehicle and Home Energy Station >
· In November 2007, Honda debuted an all-new fuel cell vehicle, FCX Clarity. Lease sales of FCX Clarity will being in summer 2008 in the U.S. and fall 2008 in Japan. In addition to achieving the ultimate clean operation, Honda will offer new value and attractiveness such as future-oriented design and the joy of driving which can be achieved only with fuel cell vehicles.

· In the U.S., Honda has begun experimental operation of the fourth-generation Home Energy Station which is designed to provide fuel for a hydrogen-powered fuel cell vehicle, as well as cogeneration functions for the home. Honda will continue to advance this technology to achieve a CO2-free society in the future.

< VOC (Volatile Organic Compounds ) >
· In October 2007, Honda became the first automaker to achieve, for all automobile models sold in Japan, an in-vehicle VOC level which is lower than the standard set by the Ministry of Health, Labor, and Welfare.

< Solar Cell >
· In October 2007, the new solar cell production plant of Honda Soltec began operation. The annual production is expected to reach the full capacity rate of 27.5 megawatts (an equivalent amount of electricity to power approximately 9,000 houses) by spring 2008.

· Sales of solar cells will be accelerated by increasing the number of distributor locations from the current 80 locations to more than 200 locations within 2008. Moreover, Honda Soltec will establish its business with an eye toward global expansion of sales.

3. Accelerating our efforts in Japan to strengthen the core characteristic that make Honda unique
[ R&D Capabilities ]
· In November 2007, Honda began the construction of a new R&D center in Sakura, Tochigi with the aim to further strengthen its R&D system and capabilities.

· The new R&D center will have multiple test courses, which replicate various driving conditions ranging from high-speed driving to urban driving. Along with Honda’s existing test courses, the Tochigi Proving Ground and Takasu Proving Ground, the new facility in Sakura will enable Honda to strengthen development of next-generation vehicles.  

· In addition to test courses, Honda decided to build a product development facility dedicated to the Acura brand within the new R&D center being constructed in Sakura with an aim to strengthen product development for the Acura brand. 

· In April 2006, Honda R&D launched a new organizational structure separating the product development functions for the Honda and Acura brands. With the addition of a dedicated development facility for the Acura brand, Honda R&D will further strengthen product development capabilities which clearly define the unique characteristics of each brand and  accelerate product development that offers new value for the customer.

· The overall size of the new R&D center in Sakura, including test courses, is expected to be approximately 2.3 million square meters (‡u). Honda should begin partial operation of this state-of-the-art and environmentally-responsible facility in 2009, with full operations in 2010. The related investment is expected to be approximately 48 billion yen.

· The existing Automobile R&D Center in Tochigi will focus its efforts on further strengthening product development for the Honda brand and development of next-generation power plants including hybrid, diesel, and fuel cell power plants. By adding a new automobile R&D center, Honda will establish an R&D system and capability which enables Honda to continue creating new value and further advance its ability to create advanced technologies and products that represent the uniqueness of Honda.

[ Production ]
· Motorcycle A new Kumamoto motorcycle production plant will be completed in spring 2008. Honda will concentrate all domestic motorcycle production to Kumamoto with a target schedule by the end of 2009.

· Automobile – Construction of a new engine plant in Ogawa and new auto plant in Yorii began in fall 2007 with a target to begin operations in 2009 and 2010, respectively.

· In order to increase the attractiveness and competitiveness of its products, Honda will apply the latest technologies at these new motorcycle and automobile plants and establish high quality and high efficiency production systems. These plants will advance Honda’s production systems and capabilities while being responsible for evolving such systems and capabilities to other Honda plants around the world.   
[ Motorcycle and Automobile Business in Japan ]
< Motorcycle Business in Japan >
· 2007 sales forecast: 330,000 units (down 6% from 2006)

· The installment of a fuel injection system to scooters sold in Japan is virtually completed. Honda Super Cub, which will celebrate its 50th year anniversary in 2008, was also advanced with installment of a fuel injection system in September 2007.

· Honda’s best selling light-weight motorcycle, FORZA, underwent a full model change in December 2007. A type of all-new FORZA equipped with an audio system will be introduced in spring 2008.
· Honda’s best selling small-size motorcycle, CB400 SUPER FOUR, now has enhanced product attractiveness with the installation of a fuel injection system in December 2007.

· In addition, in spring 2008, Honda will introduce an automatic sports cruiser, DN-01, offering the joy of riding to more people.  With this model, Honda will expand the attributes of FUN and bring a breath of fresh air to the motorcycle market.

· As a result of Honda’s effort to increase the number of “Honda Dream” dealerships, the network now has approximately 100 dealership sites. Honda will continue to strengthen the foundation of its motorcycle business and continue promoting the attractiveness of motorcycles.

 
< Automobile Business in Japan >
· 2007 sales forecast: 620,000 units (down 12% from 2006)

· Sales of the all-new Fit is going strong, and it was ranked as the industry’s best selling car for the month of November 2007. The cumulative sales of Fit in Japan, from the first generation model to the current model, exceeded 1 million units.

· The introduction of a unified “Honda Cars” logo and identity as well as restructuring of the sales network in metropolitan areas are about to be completed. As a part of this effort to strengthen sales in metropolitan areas, the new structure of Honda Cars is being established with the enlargement of existing dealership locations and opening of new locations.
· To further strengthen the Honda brand, all-new versions of four different vehicles will be introduced in Japan during 2008. Honda’s goal is to expand sales by offering attractive products which bring more joys to customers.

· With an aim to increase 2008 sales, Honda today debuts the all-new Inspire.

· Inspire is a model based on the all-new Accord which was introduced and well received in North America since its introduction in September 2007.

 
· The Accord is one of Honda’s core global models with global sales of nearly 700,000 units annually in more than 160 countries, accounting for approximately 20% of Honda’s global sales. Accord has always been packed with Honda’s latest technologies and provided value beyond customers’ expectations.  

 
· With the all-new fifth-generation Inspire, dynamic attraction as a sporty sedan and depth of quality as a high-end sedan was thoroughly pursued, in addition to the excellent basic performance of Accord.

 
· All-new Inspire provides customers in various age groups who aspire to a high-end sedan with a joy of driving that is unique to Honda.

 
· The size of the sedan market in Japan is approximately 600,000 units, however, it is still an important market which accounts for 20% of all new vehicle registrations.

 
· Despite its increased value, the price of the all-new Inspire remains close to the price of the previous model, making it very attractive in the market for a sedan in this class.

 
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