Honda has delayed the launch of its new HR-V.
Honda Motor Co.'s journey into Mexico has left it with a bout of indigestion.
The automaker's new $800 million plant in Celaya, about 160 miles northwest of Mexico City, has been struggling to meet demand amid problems caused by a green labor force, language barriers and a rail system prone to delays and occasional thefts, according to dealers who have discussed the matter with Honda officials.
Those challenges caused the plant's first product, the redesigned 2015 Fit subcompact -- which Honda was counting on to drive sales growth in the U.S. this year -- to stumble out of the gate two months late, with quality glitches and supply shortages showing up down the line.
Now, dealers say, the hitches have prompted Honda to push back the launch of Celaya's second product, the new HR-V, Honda's latest entry in the booming small-crossover segment. Dealers who had expected the car to arrive by the end of this year said they've been told that they will have to wait until the spring for shipments.
The troubles with the Fit and the plant are "such a departure from what we normally see when Honda starts a new plant in the U.S. or Canada," said Ron Harbour, a partner at consulting firm Oliver Wyman and an expert on auto plant efficiency. "What's happened is really un-Honda-like," he said.
The Fit launch has been uncharacteristically troublesome for Honda, which said it's re-examining its quality protocols worldwide. Last week, after the fifth recall in 12 months involving the redesigned model -- mostly affecting Japan-built Fits not sold in the U.S. -- Honda named a quality czar to oversee quality issues from r&d to market launch. Honda also said top executives would take pay cuts for three months to take responsibility for the car's troubles. The company said the added quality reviews could delay product launches, including the HR-V in Mexico.
Honda's bumpy road with its Mexico plant raises a warning flag for other automakers that are rushing to ramp up production in that country to take advantage of low labor costs, free-trade agreements with key export markets and insulation from fluctuations in the yen.
In addition to Honda, Nissan Motor Corp. and Mazda Motor Corp. have opened plants in the last 12 months. BMW AG, Volkswagen AG's Audi unit and Kia Motors Corp. also are building plants there.
Harbour, the auto production expert, said Mexico presents manufacturers with many challenges as well as advantages. With so many new plants springing up, finding enough skilled workers isn't easy, he said. And rail transportation can be a problem.
"Railcars do get hijacked," Harbour said. "You need to hire guards for the trains."
Honda dealers said they have had delays in Fit deliveries because the cars had to be repaired after parts were stolen from them while in transit in Mexico.
"As with shipments within the U.S. or from other plants, damage can occur during shipment," said Chris Martin, a Honda spokesman. Honda is "constantly evaluating the shipping processes to seek improvements," he added.
The Fit's troubles have been frustrating for U.S. dealers because they've seen strong consumer interest in the vehicle but haven't had enough inventory to deliver the cars customers are looking for.
"The Fit is going over really well with all age groups," said Greg May, owner of a Honda store in Waco, Texas. "You've got younger buyers coming in and people in their 50s and 60s who like the standard backup camera. But we can't get enough."
As of last week, May had just two Fits on his lot.
In particularly short supply, dealers said, are top EX-L trim-level Fits; models with navigation systems; and certain colors, such as yellow and blue. AutoNation Inc., the nation's largest dealership chain, operates 22 Honda stores, but its online inventory shows they collectively have just six Fits with navigation in stock.
George Rosenthal, a tech support specialist in Wheeling, Ill., said he put down a deposit and waited two and a half months for a Fit with a factory-installed navigation system before settling for one without.
Martin, the Honda spokesman, said Honda regrets "any inconvenience to our customers" who have had to wait to get Fits. He added that deliveries to dealers "improved dramatically through the summer" and pointed out that Fit sales had a record September -- with 6,628 cars sold, including some previous-generation models.
Even with the strong September, the Fit isn't helping Honda much. In the first nine months of the year, sales of the Fit are actually down 3 percent, at 39,618 cars. Honda brand sales have totaled 1.04 million cars and light trucks, up just 2,673 from a year earlier, while the overall market was up 6 percent.