It feels like a distant memory now, but before the coronavirus threw everything into chaos, Honda Cars Philippines, Incorporated (HCPI) was getting some heat for closing down its local factory. Its Sta. Rosa facility used to churn out City sedans and BR-V subcompact SUVs.
HCPI announced toward the end of February 2020 that the decision to close the factory was “optimization efforts in the production operations.” In other words, as blunt as it may sound, it’s more cost-effective to import the cars than to make them. Whose fault was it? Our government? Honda Motor Company in Japan? The market that didn’t buy enough? There is rarely one easy answer in situations like this.
To shed light on the matter, we went straight to the source. Before the enhanced quarantine took effect, we were able to speak directly to HCPI spokesperson Atty. Louie Soriano. We asked him eight questions, all sent beforehand, and he answered everything diligently—plus a bonus query as well. Here you go:
1) What is the background of HCPI’s decision to close the factory?
This is a response of Honda Motor to what is happening in the global automotive industry, so we see that there is a slowdown in the market, and we see that there are also rapid changes toward future technologies. In response to that, Honda needed to have an efficient utilization and allocation of resources.
It has nothing to do with local issues and labor unions; it’s a global business decision.
2) How many workers are affected? What compensation will they get?
There were 387 affected workers. So in order to help them in this difficult situation, and as recognition of their valuable support to HCPI, we provided them a separation package of 280%. That means 280% x basic salary x years of service. So if a worker has been with the company for 20 years, then you multiply for instance a salary of P30,000/month, he would get a compensation of about P2 million. By law when you close down a factory the requirement is only 50% for every year of service. We are also providing health insurance benefits until December 2020 and a lumpsum of P100,000 across all employees.
3) Will this move make Honda’s products more competitive?
What is important for us is how to address the concerns of our customers. We would like to take advantage of this by improving our customer service—provide the best customer experience. We’re going to get the best sourcing of our products.
4) What specific products are affected and where will they be sourced now?
The BR-V and the City are affected. We’re going to source them from our plants in the region. We have factories in Thailand and Indonesia, so we have to have the best sourcing. Right now the Brio comes from Indonesia.
5) Will HCP sell/vacate the Laguna property?
We are still evaluating. We are now in the process of taking inventory of the equipment, the materials. We are still winding down. We also have to convene with our suppliers.
6) What other Honda factories around the world are being streamlined?
It was already announced that Turkey and UK plants are going to be closed. That’s actually part of the response to what is happening in the world.
7) Is HCPI considering sourcing from China, like other local brands? Will that give HCPI an advantage?
We don’t think so. We are under the Asia-Oceania region, so we have to source our product from that region. The Asean Free Trade Agreement is also zero (taxes), as long as the source is within ASEAN.
8) Will HCPI still depend on local suppliers for after-sales support? How much compared to before?
No changes in after-sales. It’s going to be the same normal process for our suppliers for after-sales. We have inventoried our suppliers, and out of 47 of them, 40 are shared with other carmakers. The remaining seven are PEZA-registered companies that also export.
Bonus question: It’s no secret that a new City and Jazz are on the way? Is that a factor in closing the factory?
(We asked for more details about Honda’s new subcompact models after this, but we were just met with a laugh and an offer of dessert after the lunch we had. HCPI knows our weakness.)