Honda Says Aluminum Use May Increase on Steel Price

By Naoko Fujimura and Hiroshi Matsui

Feb. 27 (Bloomberg) -- Honda Motor Co., Japan's second- largest automaker, said competition won't allow carmakers to pass on higher steel costs to consumers, which may accelerate the use of more aluminum in cars.

``The consumer won't accept price increases,'' President Takeo Fukui told reporters in Tokyo today. ``We may see a quicker shift to aluminum.''

Nippon Steel Corp., JFE Holdings Inc., and Posco, Asia's three largest steelmakers, agreed to a 65 percent increase in iron ore prices with Cia. Vale do Rio Doce, the companies said separately on Feb. 18. Honda, Toyota Motor Corp., Nissan Motor Co. and Japan's other vehicle makers may pay a total of 200 billion yen ($1.87 billion) more for steel next fiscal year, according to analysts.
``We need to lower costs with our production process and procurement,'' as steel will remain as main material for autos for the time being, Fukui said.

Tokyo-based Honda plans to offer more fuel-efficient vehicles as the price of oil rises. Honda aims to make hybrids accounting for 10 percent of its global volume around 2010, Fukui said. Honda's sales goal for 2010 is 4.5 million vehicles.

Hybrid Plans

Honda will release a five-seat hybrid in 2009, aiming to sell 200,000 vehicles a year. Fukui also said sales of a hybrid sports car based on the CR-Z prototype unveiled in Tokyo in October may total about 100,000 units a year. The only hybrid Honda sells now is a version of its Civic small car.

The U.S., where Honda gets 41 percent of vehicle sales may not be entering a recession, as the company keeps posting record sales in areas including the East Cost and the Midwest, Fukui said. Still, sales in California and Florida, two states heavily affected by the crisis in subprime mortgages, have dropped, he said.

``I expect auto demand in the U.S. to remain firm,'' Fukui said. ``A shift to smaller cars from light trucks will probably continue''