While replacing its current engine line up with a series of next generation engines by the year 2005, Honda also plans to innovate the manufacturing system used to build these power trains to strengthen the competitiveness in the production area. Honda also plans to transfer some of its manufacturing equipment and techniques to overseas facilities to increase local parts sourcing and expand production capacity.

The new investment will establish efficient, flexible engine production lines withminimal impact on the environment. This is consistent with the "Green Factory" concept, first announced in 1997, which was initiated to achieve more efficient overall use of resources in the production area. Together with a previously announced 36-billion-yen investment plan to strengthen vehicle production, Honda will implement a comprehensive engine-to-body production system in its Suzuka and Sayama factories.

This new system will consolidate the current production lines to a capacity of 1.2 million units per year. The production capacity utilization rate for engine assembly lines will be improved from present 75% to nearly 100%.

Through these innovations Honda plans to expand its overseas production to 1.8 million units by 2003. This will result in a global production capacity of 3.0 million automobiles and power trains.

The basic objectives of the new investment are as follows:

• Increase the number of engines that can be produced on a single line by eliminating model-specific equipment and production processes.
• Substantially increase the production flexibility between production lines and factories.
• Achieve an integrated production system from engine manufacturing to vehicle assembly, and cut distribution expenses and in-house power train supply by 50% by reducing production lead-time, and thus, significantly improve the flexibility to the changes in the marketplace.