Honda Shows Cost-cutting Factory For Price Leading Insight Hybrid

SUZUKA, Japan March 25, 2009; Yuri Kageyama writing for the AP reported that Honda's cost-cutting efforts were on display today at its plant for the new Insight, where 600 of the hot-selling hybrid models are churned out each day.

The Insight has sold briskly in Japan, largely because it is cheaper than archrival Toyota's longtime hybrid champion, the Prius.

But media reports that Toyota will set the price of the remodeled Prius lower than expected will force Honda to make even more cost cuts, says Norio Ano, who oversees the Insight's development.

"We will have to go back to scratch and review all our procedures from step one," he said.

Honda Motor Co. is out to make the Insight an affordable hybrid at $19,800 in the U.S., where it is set to arrive later this month. Starting at 1.89 million yen in Japan, it has been a hit since going on sale here in February, drawing more than 21,000 in advance sales orders as of March 23, according to Honda. That's about four times the company's target.

A price war is expected to heat up once Toyota Motor Corp. rolls out its new Prius later this year.

The current Prius, which is a bigger car than the Insight, starts at about $22,000 in the U.S. and 2.3 million yen in Japan.

Japanese media reports have speculated that Toyota will not only set the new Prius price lower than initially expected at about 2 million yen but that it will also continue to sell the current Prius, matching Insight's price.

It would be an unusual move in the industry, where old models are discontinued. Toyota declined comment on the reports.

"Those are prices we would never have imagined," Ano said of the reported Prius prices, adding that Honda would likely not be able to further lower Insight's price.

Reporters got a rare look at the assembly line producing the Insight at Suzuka factory, central Japan, which also makes the Civic, Fit and other models.

To reach production volumes unprecedented for a hybrid -- and lower costs at the same time -- Honda automated some production procedures, said Fujio Hara, a Honda official who oversees production.

In one corner of the plant, a special robotic arm was rapidly screwing in parts of the hybrid battery, a process previously handled by human workers.

In another cost-cutting move, the number of parts were also reduced for what Honda calls the "intelligent power unit," made up of the hybrid battery and computer parts that control the hybrid system, he said.

The line for the Insight was flowing briskly, allowing just 65 seconds for each procedure, according to Honda.

Honda began work on cutting costs about four years ago, studying the hybrid Civic, its previous hybrid model, to come up with the low-cost Insight, officials said.