Honda believes Europe is a low-profit environment and so it will concentrate future growth efforts in Asia and North America, Automotive News Europe reported.

Honda has revamped its European goals from high growth to sustainable profitability. Honda is the No. 3 brand in Japan and second largest Japanese brand in the USA, but only the No. 4 Japanese brand in Europe, with anticipated sales this year of 200,000 vehicles. Honda may even be overtaken in Europe by No. 5 Suzuki, which wants to sell 320,000 cars in Europe by 2006.

"For us Europe is a training ground where we can bring our product quality and technology up to a high standard," said Honda Europe president Minoru Harada. "Our main sales regions will remain the USA and Asia. There we can realise profits much easier."

Honda's market share in western Europe is modest, the automaker acknowledges.

"We don't go for market share but instead seek restrained growth," said Takeo Fukui, Honda Motor president and CEO.

Honda's biggest problems in Europe are a weak image and the strong British pound that makes Honda's Swindon, England, plant less competitive, he said.

Fukui said competition is Europe is much tougher than other markets.

"Even European top companies are not as profitable as they should be," he said.

Honda has restructured its European distribution network into regions to lower the cost of managing the model mix, logistics and services.

"In the past we lost huge money in Europe. But today we are selling at profit," Fukui said.

Honda's Swindon plant is operating at 70% of its 250,000-unit capacity.

"The UK is not the ideal place to make cars because of the sterling/euro exchange rate," Fukui said.

Another major problem is Honda's weak brand image in Europe. In the USA, Honda is popular with young drivers, while in Europe Honda is considered a car for elderly buyers.

So Honda has picked BMW and Audi as brand-image benchmarks.

"We plan to produce better technology than Audi and BMW at lower prices," said Harada.

Honda wants to profile itself as advanced and sporty in Europe. It plans to introduce its Collision Mitigation Brake system within three years.

Honda's strategy sharply differs from other Japanese automakers. Toyota, Japan's No. 1 automaker, has declared the European market as one of its main sales regions. Toyota aims to boost its European sales to 1.2 million by 2010 from 800,000 this year.

Other Japanese manufacturers including Nissan, Suzuki and Mazda are planning big sales offensives in Europe, Automotive News Europe said.