Emission standards are back on the agenda in the US, with California once again leading the way with tougher standards. GM has found a way to turn the potential problem to its advantage – it is taking a supply of engines and transmissions from Honda. The Japanese car maker has an enviable reputation for its petrol engines, and GM should save money to boot.

General Motors, the world’s number one car maker, is to take supply of engines and automatic transmissions from Honda, the number two Japanese vehicle manufacturer. Around 50,000 models produced by GM’s Saturn subsidiary will be fitted with Honda-made engines in an attempt to produce cars with lower emissions. Saturn models, with their off beat, caring image, are a good choice for the new engines.

Car makers in the US are preparing to meet stringent emissions laws laid down by the state of California. The state’s regulations set a limit for a manufacturer’s range of vehicles as a whole. Therefore a range of vehicles featuring a high proportion of SUVs – which traditionally emit high levels of CO2 – needs to be balanced by smaller, more frugal models with lower emissions.

As a result, US consumers are beginning to be offered cars with diesel engines. Indeed, Honda is supplied with 1.7 litre diesel engines from a GM affiliate, Isuzu, to be fitted in its compact Civic model. That contract will run until October 2005, with plans to sell 15,000 units a year.

At one time, Honda led the field in hi-tech, high performance engines with its hugely successful foray into formula one. In the consumer market, technologies such as variable-valve timing, dubbed VTEC, have won Honda applause from the industry and consumers alike for producing a blend of performance and economy.

With the yen still weak compared to the dollar, the supply deal might also reduce costs for GM, whilst Honda will benefit from the increased business. Equally importantly, GM’s decision to turn to Honda for a supply of engines looks like a confident choice given the Japanese firm’s success in developing and producing petrol power plants. While Honda capitalises on one of its core strengths, GM gains higher quality and lower emissions at a competitive price.

SOURCE: Datamonitor COMMENTWIRE (c) 2002 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.