Why Honda is spending on shrinking section No ratings yet.

Honda’s funding contains upgraded meeting applied sciences in Marysville, Ohio.

On its face, the announcement was a head-scratcher.

Honda, an automaker recognized for its conservative strategy to increasing manufacturing globally, revealed in September that it was including 300 new jobs in Ohio and pumping $267 million into manufacturing of the 2018 Accord midsize sedan.

That is a daring transfer contemplating the headwinds the 10th-generation Accord — and all midsize sedans of its ilk — are going through.

For the primary 9 months of 2017, the section has contracted 15 % vs. the identical interval a yr earlier, to 1.four million autos. Each mannequin within the class has seen a gross sales decline in 2017, most by double digits. In 2016, section gross sales dropped 12 % general.

In fact, sedan gross sales have been slipping for years, and it is not one thing that is anticipated to cease: IHS Markit forecasts the section will account for 1.eight million gross sales in 2020 and 1.72 in 2025.

“I am unsure that the sedan section within the U.S. will ever be as massive because it was 10 years in the past,” stated Mike Ramsey, a analysis director at Gartner. “Even when we settle out at 16 million [SAAR], the share going to sedans is more likely to maintain flat or decline.”

Whereas that will make Honda’s $267 million funding appear out of step, alas, the satan is within the particulars.

Honda’s funding is much less a narrative about increasing its capability for constructing Accords and extra about facility and know-how upgrades that had been essential for the brand new mannequin.

A bulk of that funding was for the corporate’s Marysville, Ohio, plant the place the Accord and Acura TLX and ILX are constructed.

The welding division, new from the bottom up, options 342 new robots and accounted for $165 million of the overall funding. This brings to the Accord a building method known as Interior Body that saves weight and boosts chassis stiffness.

Honda makes use of a brand new laser brazing course of on the 2018 Accord to affix the roof to the physique facet panels (eliminating that black plastic garnish many sedans use to cowl the rain channels).

Because the coupe physique type was dropped for this 10th-generation Accord, Honda needed to develop its rear door-line capabilities.

Lastly, the funding concerned bringing in-house two components beforehand constructed elsewhere: the subassembly of the vehicles’ front-end modules and battery bins for a soon-to-launch hybrid mannequin.

Of the 300 new jobs, 200 are headed to the Marysville plant the place they will largely facilitate the brand new meeting applied sciences moderately than merely construct extra Accords.

Regardless of the upgrades, the capability of the Marysville plant stays at 440,000 autos. Final yr it constructed 436,846. Manufacturing this yr has been significantly slower — 281,206 autos constructed year-to-date, in keeping with Honda.

In the meantime, $47 million of the $267 million went to Honda’s Anna, Ohio, engine plant. It is Honda largest engine plant on this planet, and it is the place the corporate builds 1.5-liter and a couple of.Zero-liter turbocharged four-cylinder engines. The remaining 100 new jobs introduced final month land in Anna.

So, what occurs if the sedan section drives off a cliff and takes the Accord with it? Will these upgrades be for naught?

Largely no, says Steve Rodriguez, manufacturing supervisor for the Accord.

Honda makes use of the Interior Body building methodology on the Civic and the CR-V — two fashions that use the identical chassis structure because the Accord.

“Flexibility is type of a trademark — it is our duty to ensure going ahead that we’re versatile to have the ability to transfer fashions” to completely different meeting strains, Rodriguez stated. “With out wanting right into a crystal ball, we’re at all times making an attempt to get extra versatile so when adjustments come, we’re in a greater place for them.”

The engines constructed at Anna are shortly turning into ubiquitous all through Honda — and shortly Acura’s lineup.

However, a few of Honda’s funding is Accord-only, together with such components as the brand new roof-brazing course of and the rear-door course of, Rodriguez stated.

Regardless of the headwinds for the section, Honda is feeling good in regards to the Accord’s gross sales prospects.

“I do not anticipate to promote fewer Accords in 2018 with this nice new product,” Ray Mikiciuk, assistant vp for gross sales, informed reporters throughout a convention name in regards to the $267 million funding.

Even because the section declines, leaders such because the Accord and Toyota Camry might be well-positioned to lap up leftovers when rival manufacturers finally depart the section altogether to deal with higher-margin vehicles and CUVs.

“Perhaps they determine, ‘Properly, the section will get smaller and we’ll take an even bigger share of it,'” Ramsey stated. “Honda has been profitable with that previously.”

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