Honda Hit With Higher U.S. Steel Prices

Honda Motor Co. Ltd. CEO Takeo Fukui says the Japanese auto maker has been told by a U.S. steel supplier to pay higher prices, despite having a contract inked earlier this year that agreed to lower terms.

“It came all of a sudden, ignoring the contract,” Reuters quotes Fukui as saying. “I’m hearing that so far it’s one company, but it may spread to others. It’s an abnormal situation.”

Fukui says Honda likely has no choice but to pay the higher prices, despite having stood its ground against similar tactics earlier in the decade and importing steel from Japanese suppliers in the interim.

Honda now is negotiating contacts with Japanese steel suppliers, which also are demanding increases as the price of raw materials soars.

Reuters says rival Toyota Motor Corp. just concluded talks with Japan’s Nippon Steel Corp. resulting in a 30% hike in pricing from its previous contract.

Fukui also says the upcoming move of all Honda Ridgeline compact pickup truck production from Alliston, ON, Canada, to its plant in Lincoln, AL, will be a U.S. job-saving shift.

“The point is we won’t have to reduce employment,” he says.

Honda already has shifted all output of the Odyssey minivan and Pilot cross/utility vehicle to Lincoln from Alliston. The Ridgeline is expected to move to Lincoln’s Line 1 in early 2009.

Fukui says the move will allow the auto maker to build more Civic small cars at Alliston.

“Gas prices continue to rise and the demand for cars with good mileage is growing,” he tells the Associated Press. “Efforts are under way to increase the local production of the Civic.”

Lincoln plant spokesman Ted Pratt says Honda is not concerned that making the facility the exclusive source of its light-truck models is a bad thing, given the drop this year in light-truck sales in the U.S.

“It depends on what light trucks you’re looking at,” he says, inferring Honda has been able to weather the decline better than other auto makers. “We’re very confident with the products we’re offering now.”

He says Honda has not cut production at Lincoln and continues to build 1,300 vehicles and V-6 engines per day.