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Honda 2008 Mid-Year CEO Speech - 3 New Honda Hybrids Coming Soon!

Honda Chairman Takeo Fukui and Honda CR-Z Hybrid Concept at Tokyo Motor Show 07

TOKYO, Japan, May 21, 2008 - A new 3-year mid-term plan began in Aprilof this year. The basic idea for this 3-year plan is to establish acorporate structure necessary to sustain our strengths and that will enableus to grow globally in the future, and begin such efforts initially underthe leadership of our operations in Japan.

Two concrete directions are set as followings;

1. To create world-leading environmental technologies, bring them tolife as products, and offer them to more customers. 2. To achieve asignificant advancement toward the next generation of manufacturing systemswhich will enable Honda to create such advanced products.

Japan will play a central role. The goal of our efforts will be tomature technologies and products in Japan, which put Honda at the forefrontin the area of environment, and evolve them from Japan to the world alongwith the advancement of our manufacturing systems and capabilities.

Toward this end, various measures will be taken with a focus on thefollowing three core areas;

1. Strengthening motorcycle business 2. Innovation of automobilemanufacturing in Japan 3. Hybrid strategy to achieve full-scale marketpenetration

1. Strengthening motorcycle business

[Importance of motorcycle business / 50th anniversary of Super Cub]

Honda began its business with motorcycles, entered into the globalmarket with motorcycles, and established a business foundation which laterenabled Honda to enter into the automobile business.

Motorcycle business is the driving force of Honda"s growth andexpansion, and it is one of the key strengths of Honda that otherautomakers do not have.

Honda currently sells more than 13 million motorcycles annuallyincluding commuters which provide an essential means of transportation forpeople in their daily lives as well as recreational large-size motorcycleswhich provide the joy of riding.

Among such Honda motorcycle products, the Super Cub model thatrepresents Honda is celebrating its 50th anniversary this year.

The Japanese-born Super Cub has maintained its original creative conceptand basic style, but has continuously advanced as a model that accommodatesthe needs and preferences of people in different areas around the world. Asa result, the Cub series achieved cumulative worldwide production of 60million units (as of the end of April 2008).

Demand for motorcycles as a means of transportation is expected tocontinue to grow mainly in Asian and South American nations. In addition,considering the global high price of crude oil, there is a good chance thatmotorcycles will be considered not only in developing countries but on aglobal basis.

Honda will create motorcycle products which reflect the uniquecharacteristics of Honda and exceed the expectations of customers whilestriving to develop another model which creates a new motorcycle categoryand market as did the Super Cub.

[Strengthening motorcycle production]

Toward this end, it is important to strengthen motorcycle production.The new motorcycle plant at Honda"s Kumamoto Factory, which began operatingin April 2008, will play a key role.

The goals of the transfer of motorcycle production from Hamamatsu, thebirthplace of Honda, to Kumamoto are; 1) to improve efficiency byconsolidating production and 2) to strengthen Honda"s ability to buildmotorcycle products which offer new value with even higher quality.

Moreover, Honda will thoroughly strengthen its manufacturing operationsat the starting point in Japan, dramatically enhance its competitiveness,and leverage this enhanced competitiveness to further grow and advance itsglobal motorcycle business.

Production at the new motorcycle plant at Kumamoto Factory will reachits full-capacity in the first half of 2009.

In order to efficiently produce approximately 60 models, from commutersto large-size motorcycles, Honda conceived and built from scratch highlyefficient and ideal production lines to accommodate the uniquecharacteristics of each model.

In addition to employing various state-of-the-art equipment, reducingthe number of production processes and increased automation are used formass production models. The new plant will produce motorcycles on threemain lines which achieve a high level of human resource efficiency and highflexibility. The new plant also has 15 cell lines where high value addedproducts are assembled completely by a small team of associates.

These cell lines make it possible to build a product with enhancedattractiveness and quality. At the same time, a cell line has a significantbenefit in the area of human resource development as it is ideal for theadvancement of associates" skills and sharing of production know-how.

Through these initiatives, including a 20% improvement in workforceefficiency compared to the existing plant, Honda will strive to establish astrong motorcycle production system which will remain highly competitiveeven if the exchange rate of the Japanese yen to the U.S. dollar is in the90s.

The new plant also is an environmentally-responsible plant which reducesCO2 emissions by approximately 20% compared to the existing plant throughvarious efforts including utilization of natural energy.

As the leader plant within Honda"s global motorcycle production network,and as a source of Honda"s strength to create products that will exceed theexpectations of our customers around the world, Kumamoto Factory will be adriving force of motorcycle business growth in the future.

[Strengthening technological and product attributes]

In the area of environmental technology, installation of PGM-FI (Honda"sProgrammed Fuel Injection) on all scooters sold in Japan is now virtuallycompleted, and PGM-FI will be installed on to all Honda motorcycles sold inThailand by the end of 2009. Honda plans to install PGM-FI on most of itsmotorcycles worldwide by the end of 2010.

In the area of safety technology, Honda will install a motorcycle airbagsystem and ABS (Antilock Brake System) on more products. Honda plans toinstall ABS in all 250cc or larger class models worldwide, except off-roadmodels, by the end of 2010.

In advancing nations, Honda will introduce a new model, in the mostpopular 100cc class, which achieves high fuel efficiency, high performance,and low cost. Sales of this new model will begin first in Thailand insummer 2008 and then in other Asian countries.

In advanced nations, Honda will introduce its innovative environmentaland safety technologies including a Variable Cylinder Management (VCM)system for motorcycles which significantly improves fuel efficiency as wellas electronically-controlled combined ABS (C-ABS), an advanced brake systemwhich further improves stability while braking. Moreover, Honda willimprove the product attractiveness of medium-to-large size models andstrengthen those aspects of a product which contribute to the joy ofriding.

Motorcycle R&D will also be strengthened with a determination andpassion to create the Super Cub of the next generation.

2. Innovation of automobile manufacturing in Japan

[The thinking behind manufacturing reform in Japan]

In addition to the new motorcycle plant in Kumamoto, several nextgeneration production plants will begin operation in Japan over the nextthree years, including Hamamatsu Factory which will undergo renovation,Yachiyo Industry"s new mini-vehicle production plant, Honda"s new engineplant in Ogawa and the new auto plant in Yorii.

In regions outside of Japan, a new auto plant in Indiana, in the U.S., anew engine plant in Canada, and a second auto plant in Thailand will beginoperation in the latter half of 2008.

Honda has been promoting the autonomy of regional operations in order toenhance customer satisfaction in each region and to improve businessefficiency. However, in order to further strengthen Honda"s competitivenessand product attractiveness, it is necessary, as in the case of motorcyclebusiness, to have a strong Japan operation which will further refine andadvance production technologies in Japan and evolve such technologies toregions outside of Japan.

In the early 2000s, Honda introduced at Suzuka Factory and Sayama Planta flexible production system which is capable of producing multiple vehiclemodels based on market demand. This system was evolved to regions outsideof Japan, and Honda established a global production system which iscomplementary among various regions.

As a result of this introduction of the New Manufacturing System underthe leadership of Japan, Honda became capable of flexible production on aglobal level which accommodates changes in market demand.

In order for Honda to continue providing high quality and highlyattractive products to customers around the world and to sustain itsadvancement and growth in the future, new innovation of manufacturing isnecessary. Honda realizes that the time has come again for Japan to takethe initiative and take on new challenges.

The purpose of this series of manufacturing reforms is to innovateHonda"s manufacturing technologies and systems with a customer focus sothat Honda can continue creating products which satisfy customers more thanbefore. Toward this end, Honda will strengthen its manufacturing system byreorganizing its manufacturing operations in Japan and by refining Honda"s"New Value Creation."

One of the key roles Honda operations in Japan will play is to evolvethe results of the reform globally to the other Honda operations outside ofJapan.

Yachiyo Industry will build a new mini-vehicle plant on land adjacent toits Yokkaichi Factory. Once the new plant becomes operational, Honda"sKumamoto Factory will transfer the production of mini-vehicle engines tothe new plant. This will enable the company to establish a highly efficientproduction system which is capable of synchronous production ofmini-vehicles including the engine and the complete automobile.

The purpose here is to reform Honda"s mini-vehicle business bystrengthening the link between products and production. In order to respondto growing demand for mini-vehicles in Japan, Honda will not onlystrengthen competitiveness of its mini-vehicle products but alsosignificantly advance the mini-vehicle production plant.

Honda is not looking just at mini-vehicle business in Japan. Completingthe fundamental reform and improving cost competitiveness in themini-vehicle market, where cost pressures and customer expectations arevery severe, will enable Honda to gain a significant strength in dealingwith intensifying global competition in the future.

[Engine plant in Ogawa and auto plant in Yorii]

The new engine plant in Ogawa, which will become operational in thefirst half of 2009, and the new auto plant in Yorii, which will becomeoperational in 2010, will play a central role in this manufacturingreform.

Honda"s goal with these plants is to advance them as next-generationmanufacturing plants and enable their success to lead to Honda"s growth ona global scale.

The new engine plant in Ogawa will be responsible for the production ofthe next-generation high-performance environmentally-responsible engineswhich require highly advanced manufacturing technologies. At this plant,Honda plans to flexibly produce multiple engines which require differentproduction processes, including gasoline engines, diesel engines, in-line4-cylinder engines, and V-type engines.

The Yorii plant will, as a leader in the area of the environment, striveto become a next-generation auto plant which pursues energy efficiency andcreates new values at the same time.

Through various initiatives including the introduction of astate-of-the-art system which optimally controls the amount of energy usedfor production and the recycling of energy, the Yorii plant will strive tobecome an environmentally-responsible and advanced auto plant which reducesthe amount of energy used to produce each vehicle by more than 30% comparedto production at the exiting Sayama plant.

For the assembly process, a universal design is employed to achieve apeople-friendly line.

Moreover, Honda will establish a next-generation manufacturing systemcapable of tracing each individual component to a complete vehicle and to acustomer in order to further improve product quality and customersatisfaction.

At the Yorii plant, in addition to improving workforce efficiency by20%, efficiency in the area of logistics will be largely improved byestablishing Delivery Control Center. Through these efforts, Honda willfurther improve its competitiveness.

Striving to establish these next-generation plants which will become aleader for other Honda manufacturing operations around the world, Hondaplans to invest a total of approximately 158 billion yen for Ogawa andYorii plants.

3. Hybrid strategy to achieve full-scale market penetration

Reduction of CO2 emissions is a means to protect the environment on aglobal scale. Recognizing CO2 reduction as one of the most importantenvironmental challenges, Honda became the first automaker to announceglobal CO2 reduction targets for 2010 for both its products and productionactivities and is making efforts in various areas.

There are many ways to reduce CO2. However, Honda believes that, in theproduct area, the advancement of hybrid technologies is the most practicaland effective measure at this time.

It is important to move hybrid vehicles from the current image-orientedstage to the new stage toward full-scale penetration.

To accomplish this goal, Honda is making an all-out effort to introducea new dedicated hybrid vehicle.

Based on the belief that a hybrid vehicle made by Honda must satisfy andplease customers by offering new attractiveness as an automobile, the newdedicated hybrid vehicle largely improved attractiveness as a automobile inaddition to its environmental performance.

With a convenient and compact 5-door/5-passenger size and an exteriordesign that employs the concept of the FCX Clarity, this vehicle willachieve unique and highly innovative characteristics as a dedicated hybridmodel.

For its hybrid system, a compact, lightweight, and highly-efficient IMA(Integrated Motor Assist) system was developed with the idea of providingmotor assist when it is necessary during startup and acceleration whilerelying on the engine as the main power source.

Through a newly developed platform which positions the control unit andbattery underneath the cargo space, this new dedicated hybrid vehicleachieves light and comfortable driving. It is nearing final development asa vehicle that creates a new world of driving that is not offered by aconventional gasoline-powered vehicle.

Various technologies, including a function to assist more fuel efficientdriving, are being installed to achieve a further improvement of practicalfuel efficiency, so that customers can actually experience the excellentfuel efficiency of this vehicle.

Moreover, in addition to weight reduction, significant cost reductionwas achieved through various measures including making key components ofthe system such as the control unit and battery more compact, creating athinner motor, and further advancing the equipment and processes used toproduce the motor.

For example, a new motor production line will be added at SuzukaFactory, and per-hour production capacity of this line will be more thandoubled compared to the existing line by increasing the speed of eachprocess and increasing the ratio of automation.

This new motor production line will become operational at the end of2008. Total annual production capacity will be expanded to 250,000 unitsincluding 70,000 units from the existing line. Further expansion ofproduction capacity is possible to accommodate demand growth in thefuture.

Through this comprehensive approach, an even more affordable price willbe achieved, so that this hybrid vehicle will be chosen rationally by morecustomers based on its economic benefit.

At the same time, this will make it possible to establish a healthystructure for the success of hybrid vehicle business.

Honda"s new dedicated hybrid vehicle will go on sale in Japan, NorthAmerica, and Europe in early 2009 with expected annual global sales of200,000 units.

Honda will expand hybrid sales in the small class by introducing a newsporty hybrid based on the CR-Z, Civic Hybrid, and the addition of a FitHybrid model.

Combined annual sales of these four hybrid models is expected to reachapproximately 500,000 units.

[Next generation fuel cell vehicle: FCX Clarity]

A fuel cell vehicle, which emits no CO2 and uses no fossil fuel, whilein operation is an essential technology for the earth, and Honda is makingsteady progress toward market penetration of fuel cell vehicles.

FCX Clarity is a world-leading next-generation fuel cell vehicle, whichis, designed from scratch as a fuel cell vehicle.

Lease sales of FCX Clarity will begin in the U.S. in July 2008 and inJapan in fall 2008.

In the U.S. and Japan combined, Honda expects to lease several dozen FCXClarity models per year to reach a total of approximately 200 units in thefirst three years.

Honda is planning to provide FCX Clarity for the Hokkaido Toyako Summit,where advanced environmental technologies will be showcased.

Strengthening motorcycle business, which is one of Honda"s keystrengths; innovation of manufacturing in Japan, which is a source ofHonda"s competitiveness; and the hybrid strategy toward full-marketpenetration will empower Honda to continue creating products and joys whichexceed customers" expectations and to grow globally in the future.

During this 10th Mid-term business plan, Honda will make steady progressmostly through the leadership of our Japan operations.

Finally, on May 29, 2008, Honda will introduce an all-new mini-van"Freed," to the Japanese market. With this vehicle Honda plans toaccelerate its sales in Japan, following the all-new Fit, and strives torevitalize the domestic automobile market in Japan.