Japanese automaker Honda said Wednesday that it will invest $154 million in a new engine plant in Alliston, Ont., as the company bulks up its North American production to meet strong demand.

The move is expected to create 340 new jobs atHonda's currentAlliston facility,about 80kilometres north of Toronto, and hundreds more in the construction and auto-parts sectors.

The new facility is scheduled to open in 2008 and will produce about 200,000 four-cylinder engines a year, said Honda Canada president and CEO Hiroshi Kobayahi during a press conference in Toronto. The Ontario-built engines will replace powerplants that currently come from Ohio, he said.

The new facilitywill complement Honda's two existing Alliston assembly plants, which employ about 4,300 people and can produce 390,000 vehicles a year.

The first Alliston plant, which opened in 1986, produces the Honda Civic Sedan. The second Alliston plant, which began producing vehicles in 1998, makes the Honda Ridgeline, Acura MDX and Honda Pilot SUV.

The company unveiledits plan in Tokyo. The announcement was part of a broaderstrategy to spend $640 million on plants in Japan and North America.

"We have been looking at changes in demand and decided to expand our capacity," said Honda CEO Takeo Fukui said. "Competition on a global scale is expected to intensify."

A new U.S. plant is expected to be built in Alabama, where the company already has one facility. Honda also has plants in Ohio and Mexico.

Honda's five North American plants cannot meet demand and the company has had to import vehicles. North America accounts for about half the company's annual global sales.

The company sold 1.65 million vehicles in North America last year and expects to sell about 1.72 million vehicles in 2006. The company's North American plants can produce about 1.4 million vehicles.

Japan's No. 3 automaker says the three plants are aimed at meeting an ambitious 34 per cent increase in annual sales to 4.5 million vehicles a year by 2010.

In April, Honda reported a record quarterly profit of 219.5 billion yen ($2.2 billion) for the first quarter, representing more than double its income from a year ago.