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Honda to Expand Production In U.S., Unveil New Hybrid

by: Sholnn Freeman    18 May 2006

Honda Motor Co. said yesterday that it will expand production in the United States and Canada and introduce a small hybrid gas-electric passenger car and other vehicles that run on cleaner diesel engines.

Honda said it intends to spend $400 million to build an assembly plant in the Midwest, although the site has not been chosen. Honda also said it will build a new facility in Canada to make four-cylinder engines and will expand a transmission plant in Georgia. Altogether, the company said it will invest $665 million and add 1,900 employees for a total U.S. workforce of 31,000.

The auto industry is being rattled by $3-a-gallon gasoline. The chief executives of Detroit's Big Three auto companies are scheduled to meet with Democratic and Republican leaders on Capitol Hill today to discuss energy issues. Honda's expansion occurs as Detroit automakers are closing dozens of factories and eliminating thousands of auto manufacturing jobs.

Honda is not the only Asian automaker turning up the pressure. Toyota Motor Corp., the largest Japanese auto company in the United States, has factories under construction in Texas, Canada and Mexico. Toyota continues to roll out new hybrid models, including a version of the Camry, the top-selling car in the country, that began arriving in dealer showrooms last month.

Environmentalists said Honda's new diesel technology could help diesels gain a stronger footing in the United States. Diesel-powered cars, which are 30 percent more fuel-efficient than gas-powered cars, are big sellers in Europe but have struggled against emissions standards in the United States.

Honda said its diesel engines have overcome a large hurdle: a smog-forming pollutant called nitrogen oxide, or nox.

"Solving the nox problem has been the holy grail of the diesel world," said David Friedman, research director for the clean vehicles program at the Union of Concerned Scientists. "If they have figured out a way to do that, then diesel has a much brighter future."

DaimlerChrysler AG has competing diesel technology that meets U.S. standards, but the technology requires drivers or dealers to change a special fluid in the engine system after 8,000 to 15,000 miles.

Honda is determined to retain its reputation as an environmentally friendly car company, said Ed Cohen, Honda's vice president of government and industry relations. Honda is fending off a challenge from Toyota, which has gained a great deal of visibility from the popularity of its Prius hybrid.

Martha Voss, a spokeswoman for Toyota, said the automaker welcomed any challenge on the environment from Honda. "We currently have five hybrids on the road and more to come," she said.

Honda said its new gasoline-electric hybrid car will enter the U.S. market in 2009. The car will be smaller and less expensive than the Civic. Honda has set a U.S. sales goal of 100,000. The car will be built in Japan and sold in countries around the world. Honda didn't release details about fuel mileage or design.

John Mendell, Honda's senior vice president of automobile operations, said Honda has "very high aspirations for the vehicle."

Honda was the first automaker to introduce a hybrid car in the United States when it began selling the two-seat Insight in 1999. It brought out a its second hybrid -- a Civic model -- in 2002. Toyota's first-generation Prius made its U.S. appearance in 2000.

At first, hybrids were derided in Detroit as a "micro-market" and virtually ignored by most American consumers as impractical because they were so compact.

Honda's early lead in hybrids was overtaken by Toyota's introduction of the redesigned Prius in 2003. The car became a favorite of Hollywood celebrities who helped make it an environmental icon. A Toyota executive has referred to the car as the automaker's hybrid "pinup girl."

Honda's Civic hybrid has sold well, but its latest model -- a hybrid version of the Accord -- flopped. Dealers say consumers recoiled when they saw the Accord hybrid's base price of $31,000, about $3,700 above the price of a standard Accord. Also, the hybrid model's performance was emphasized over fuel efficiency, which dealers say hurt its sales.

Also yesterday, Honda issued a goal to improve the fuel economy of its cars and trucks by 5 percent, to 30.6 miles per gallon by 2010. Friedman called the target "pretty unimpressive." He said big gains in fuel economy in the industry have been stalled since the 1980s. "On fuel economy, even they have a long way to go," he said of Honda.

© 2006 The Washington Post Company