Honda hit by slowdown; stops work on 2nd plant

Japanese car giant Honda has indefinitely put on hold opening of its Rs 1,000-crore second plant in India due to slowdown in the auto market.
  
The company has also terminated the service of about 1,000 temporary workers as it had cut India output by 50 per cent from the beginning of this year.

"We have not fixed any timeline for opening the second plant... It has been put on hold indefinitely," Honda Siel Cars India (HSCI) President and CEO Masahiro Takedagawa told reporters here.

"Our Greater Noida facility has a production capacity of one lakh unit, but this fiscal we expect to sell only about 55,000 units. After utilising the full capacity of this plant, we will start the second plant," he added.

The company, which is present in India through a joint venture with the Siel Group, has cut its production to 200 cars a day in a single shift since the beginning of this year from earlier the capacity of 400 units a day in two shifts.

"As we cut our production by half, so we have not renewed the contract of our temporary workers since August last year, but we have not let go our permanent staff," Takedagawa said.

The company has so far terminated the service of about 1,000 temporary workers, he added.

Last week, Takedagawa had said Honda would continue to produce in single shift for the next six months.

In December 2008, HSCI had announced its plans to defer capacity expansion at its second Indian plant at Tapukara in Rajasthan in view of the current economic slowdown, which has also impacted the automobile industry. Initially the plant was scheduled to start operations from the fourth quarter of 2009.

The company had announced an initial investment of Rs 1,000 crore at the Rajasthan plant, of which Rs 600 crore has already been used. It was being developed with an initial capacity of 60,000 units per annum.