Honda Motor (NYSE: HMC - News) is to suspend production at its British plant in Swindon for two months in February and March as part of a fresh round of production cuts prompted by slumping worldwide sales.

Japan's second-biggest automaker said on Friday the suspension would help it reduce production by a further 61,000 vehicles worldwide in the financial year ending in March, on top of reductions it had previously announced.

Honda cut its worldwide sales forecast by about the same number last month. The Swindon shutdown will result in 21,000 fewer vehicles being produced while a slower production at one of its factories in Japan will cut output by a further 40,000 vehicles.

Honda said its 5,000 workers in Swindon would be laid off without pay during the shutdown.

Global carmakers have suffered a sharp decline in sales in the US, the largest auto market, where a limp economy and the credit crunch have combined to drag sales to their lowest level in more than two decades. Japanese and European demand is also in decline.

In the US, Detroit-based automakers have been shutting plants and lobbying Washington for emergency funds. Japan's carmakers, financially more robust, have taken less dramatic steps, but they have also been slowing production lines and cutting loose thousands of temporary and contract workers.

A sharp rise in the yen has compounded their problems by shrinking the value of repatriated overseas profits.

Honda's decision follows announcements by Isuzu and Mazda on Thursday of a combined 2,700 job cuts in Japan. Nissan, Japan's third-biggest producer, said last week it would cut four shifts at one of its Japanese factories to reduce production by 72,000 vehicles this year.

Fitch Ratings downgraded Nissan's long-term debt rating on Friday from "A-minus" to "BBB-plus" and signalled that further cuts could follow.

At Toyota, Japan's top carmaker, the response to the crisis has been representative of the industry's retrenchment. The company plans to reduce the number of contract workers on its Japanese payroll to about 3,000 by the first quarter of next year from more than 9,000 in the same period this year.

Contract workers have made up anywhere between 20 per cent and one-third of Toyota's Japanese production workforce during the past few years. They supplement a permanent production force of 21,500, who enjoy a higher level of job security and benefits.

Toyota has also suspended production at some plants in the US as part of a broad reorganisation of its manufacturing operation in the country, designed to renew its focus on smaller, fuel-efficient cars. On Wednesday it announced a rare two-day shutdown for all of its North American factories next month.