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Honda sees U.S. sales rebound of 23 percent

By Kevin Krolicki

DETROIT (Reuters) - Honda Motor Co <7267.T> expects U.S. sales to jump by 23 percent in 2012 as dealer inventories return to normal levels and the Japanese automaker makes up for lost ground against rivals, executives said.

"It looks like a high number but we had a really low year," Tetsuo Iwamura, president and chief executive of Honda's U.S. operations said on Tuesday.

The projected rebound in 2012 follows a miserable year for Honda in its major market. Honda sales are off by 5 percent after output fell first in the wake of the March earthquake in Japan and then fell again in October when flooding in Thailand shut down supplies of electronic components.

Honda's U.S. market share has tumbled to 9 percent from 10.5 percent. The only major automaker that took a larger hit in 2011 sales was Toyota Motor Co <7203.T>, which has seen its market share drop from 15 percent to about 13 percent.

In a further blow to Honda, the just-released version of the Civic was panned by critics and failed to score a recommendation by Consumer Reports, the first time the compact car had been snubbed by the influential magazine in more than a decade.

Partly in reaction, Honda has fast-tracked an upgrade for the Civic for the 2013 model year.

Iwamura, who was speaking to a small group of reporters, said competitive pressure from a range of new small cars including the Ford Fiesta and the Chevrolet Cruze had raised the stakes for the Civic.

"Our competition got bettter. That is a fact," Iwamura said. "In the past, we had a wider gap. Now it is narrower."

Honda's comeback strategy for 2012 starts with a plan to bring dealer inventories back to pre-quake levels so consumers have more choice at showrooms.

At the start of December, Honda dealers had inventories of about 73,000 cars including the Civic and the Accord. That compares with 155,000 cars in stock a year earlier.

By the end of the first quarter, Honda expects to have inventories back to more normal levels. The 2012 target is sales of 1,250,000 Honda vehicles and 180,000 for the automaker's Acura premium brand, Iwamura said.

In response to the stronger yen and the supply chain shock that followed the March tsunami and earthquake disaster in Japan, Honda has also moved to step up North American production of vehicles and its sourcing of parts.

That includes plans to build 40,000 more trucks at the Alabama plant that makes the Odyssey minivan and the Pilot SUV and another 100,000 cars at the Indiana plant that makes the Civic over the course of a full year.

Honda is also building a plant in Celaya, Mexico, set to open in 2014. That plant will build the Fit subcompact.

In 2011, about 87 percent of the Hondas sold in the United States will be produced in North America. About 80 percent of components in vehicles made in North America are made locally.

"That number will increase and is increasing," Iwamura said.

At the Detroit auto show in January, Honda will show a pre-production version of its Accord coupe. The Accord, first introduced in 1976, is Honda's top-selling U.S. vehicle.

Honda will also use the Detroit show to debut three new models for Acura, including a new luxury compact, the ILX, that will be built on the same platform as the Civic.

Despite taking some heat for what critics have called drab vehicle styling with recent launches, Iwamura said Honda would stick with the design principles it believes helped make its cars popular in the United States.

That includes measures to improve driver visibility and interior capacity, a set of principles Honda calls "man-maximum, mecha-minimum."

"We don't think our styling is behind Hyundai or Ford," Iwamura said in response to a question. "We don't have any intention of switching our design principle. Not following fashion, that is our design principle."

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