Honda cuts American production, Lynn dealership feels ripples

Item staff and wireLYNN – News on Monday that Honda plans to temporarily cut its U.S. and Canadian factory production in half for the second time this year comes as a blow to local Honda dealers who are struggling to maintain inventory.Parts shortages from three months of catastrophic flooding in Thailand have forced Honda to cut its North American production in half for the second time this year, the automaker said Monday.The cuts, which come just as Honda was recovering from the March 11 earthquake and tsunami in Japan, will run from Wednesday at least through Nov. 10 as Honda tries to find alternate sources for microprocessors that are made in Thailand.The flooding, which began in July and has forced many auto parts plants to close, also affected Toyota Motor Co., which cut overtime for production in North America through the end of this week.”Unfortunately it is going to affect us,” said Mike O’Keefe, general manager of Kelly Honda on the Lynnway, among the region’s busiest Honda dealerships. “We were just building our inventory back up closer to normal since the earthquake and tsunami.”O’Keefe said Kelly’s typical Honda inventory is between 300 and 350 new cars at this time of year, but due to production setbacks the volume lately has been closer to 80 to 100 cars per month. For a period immediately following the tragedy in Japan, he said, volume dipped to 30 to 35 new cars per month.”We just received notification about this a couple of hours ago and don’t know yet what it’s going to mean for our inventory levels. We’ll take care of our customers but this will affect supply and demand,” O’Keefe said.O’Keefe said he was informed about the production scale-back in an email from John Mendel, American Honda executive vice president. In that email, O’Keefe said, Mendel noted six Honda factories in the United States and Canada will scale back production through mid-to-late December, by 50 percent through Nov. 10 and then gradually increasing production through the end of the year.”At least this is for a finite period,” O’Keefe said. “After the tsunami we didn’t know what was going to happen, when the factories would be back up to capacity.”Honda Motor Co.’s announcement comes the same day the Japanese automaker announced that its quarterly profit tumbled 56 percent, battered by the strong yen and production disruptions from the March tsunami disaster.The automaker, which makes the Accord and Civic sedans, said Monday that net profit for the July-September fiscal second quarter fell to 60.4 billion yen ($788 million).Quarterly sales sank 16.3 percent from a year earlier to 1.885 trillion yen ($24.6 billion), with sales in North America falling the most – 22.3 percent.Flooding in Thailand, where Honda has parts suppliers and assembly lines, made it too difficult to forecast earnings for the full fiscal year through March 2012. A projection will be announced when it becomes available, the company said.Honda also said it will stop all production in the U.S. and Canada for one day on Nov. 11, and all Saturday overtime work will be canceled through November. Spokesman Ed Miller said it’s too early to tell if there will be a repeat of model shortages that occurred during the summer and early fall due to parts shortages from the earthquake and tsunami.The company said in a statement that the December sale date for the 2012 version of the popular CR-V crossover vehicle could be delayed by several weeks. Honda says it will announce the sale date in the near future.Last year, 87 percent of the Honda and Acura luxury vehicles sold in the U.S. were made in North America, the company said. Most of the parts are produced here, but a few critical electronic parts such as engine control modules come from Thailand and other countries, Honda said.The Daily Item’s Sean Leonard added material to this Associated Press report.Sean Leonard can be reached at [email protected].