Honda Motor Co (7267.T)
is taking steps to raise output in Japan in preparation for a likely
uptick in demand if a bill to offer consumers cash to replace old cars
becomes law, its chief financial officer said on Wednesday.

Japan's parliament is deliberating legislation to encourage
consumers to ditch cars that are more than 13 years old in favor of
fuel-efficient models with a 250,000 yen ($2,500) reward, and is widely
expected to pass the bill in the next month or so.

Like most of its rivals, Honda did not include the extra demand into
its domestic sales forecast of 555,000 units in the year to March 2010,
but Chief Financial Officer Yoichi Hojo said preparations were already
underway to lift production.

We're in the process of finding out what we need to do in terms of
people and components to make a production expansion possible, Hojo
told Reuters in an interview.

The auto industry lobby has forecast a sales boost of about 690,000
vehicles this year from the incentive, of which Honda reckons its share
to be around 70,000 to 100,000 units.

Honda is also looking to slightly boost production of the new
Insight hybrid due to robust orders in Japan so far, Hojo said. The
car, which became the first hybrid model to top the best-sellers' list
in Japan last month, was selling roughly in line with plans in the
United States, Hojo said.


While overall demand in the United States was showing no signs of
recovery yet, Hojo said there had been an improvement in credit
availability for consumers and used-car prices were bottoming out.

Underscoring the further easing of the credit crunch, Hojo said
Honda's U.S. finance unit was planning to launch $1.5 billion in
asset-backed securities in the April-June quarter. American Honda
Finance is also negotiating a loan of 100 billion yen with the
state-backed Japan Bank for International Cooperation, he said.

I would say fund-raising concerns have diminished substantially,
Hojo said. He added that Chrysler's bankruptcy filing last month had
had little impact on that situation.

Honda last month forecast a small profit for this financial year as
it cuts costs to counter plunging car sales and a strong yen.

Hojo said much of the restructuring costs, including those arising
from early retirement packages in North America and Europe, would be
booked in the first half to September 30, adding that Honda was not
considering any further steps to shrink its operations.

The current pace of sales in the United States is not going to continue for five, 10 years, he said.

Honda slapped on an average $1,849 in incentives per vehicle in the
United States last month to work down inventory, up $666 from the year
before, helping it limit its April sales decline to 25 percent compared
with the market's 34 percent.

Hojo said April was likely the peak for Honda's incentives spending,
adding that for the full year, the automaker planned to lower its
per-unit outlay by around $150 from $1,200 last year.