Honda Halves Production At Swindon Plant Analysis

Swindon factory halving production

Honda’s factory in Swindon has cut its production by almost half due to a lack of parts from Japan because of the earthquake and tsunami. Production was aimed at being 250,000 but was lacking at 135,000 – almost half of what its capacity is. To counter this, Honda are going to make the workers do overtime when production increases with no increase in the salary.

This does make sense as if a worker is paid for two weeks of work, s/he should work for two weeks. At the moment, workers in the Swindon factory are being paid for five workings days but are working a dismal two days. This means workers should work three days extra per week as they were paid for doing nothing three days a week. It makes sense? But what problems can this cause?

Firstly, there is the acceptance that will the workers work overtime? The morale will be low due to overtime they will have to work which may cause Honda to conduct motivation to the workers or empower them with responsibility. Either way, they will have to keep a positive mood to this whole situation. From my point of view, I don’t think every one of the 3000 people will be willing to do the overtime, even if they have to.

However though, for Honda, this has happened already. In February 2009, there was a decline in the market for cars which led to the decrease in the production of cars. Therefore, workers should be use to the ‘worrying times’ already and understand the situation they are currently in.

Another problem Honda may face is quality, which with cars, is extremely important. Workers that will work two days a week should keep up to standards with the quality. But, when fatigue kicks in with overtime workers, quality may reduce which may result in the conduction of quality assurance and control: Honda will need the best both to increase the quality.

Japan’s disasters having knock-on
effect with Honda in Swindon

Although the news article from Sky doesn’t state whether the three models, the Civic, Jazz and CRV, are being made by hand or machine, with a huge company Honda is, the likely hood is that the cars are being made in mass quantities with machines. This will help with the quality issue as machines can build millions of cars, all exactly the same way with the same high level of quality.

From my point of view, Honda will be losing out a lot due to this natural disaster in Japan. They are not utilising their capacity, with a mere prediction of 135,000 being made this year compared to the maximum capacity of 250,000. This will mean the cost per unit will increase on each car due to the fixed costs staying well fixed. The idea is that the closer to maximum capacity anything is when being produced, the cheaper each unit will be. Now, for Honda, this will mean the profit margin on each of the cars made in Swindon will be a lot smaller resulting in less profit being made of them 135,000 cars.

There isn’t much Honda can do though. It’s a domino effect: the decrease in parts from Japan means decrease in production at Swindon decreases the profit margin decreasing the profit. If I was Honda at this moment in time, I would change the supplier of the parts or decrease maximum capacity to 150,000. Moving suppliers may result in more expensive parts but if they work at making 250,000 cars annually, the extra cost of the parts will disappear to the factory being at maximum capacity. The other option is to cut capacity to 150,000 which is an option I would feel wouldn’t benefit Honda in the long run. As this problem is only temporary, Honda will know they will be able to be at full capacity within at least a year. Therefore, there is no need to decrease capacity.

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