Honda shifts focus from SALES NUMBERs to QUALITY OF PRODUCT.
06-17-2003, 11:28 AM
#1
Cost Drivers!!!!
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Honda shifts focus from SALES NUMBERs to QUALITY OF PRODUCT.
News Analysis: Honda plan seeks profit, not sales as Japanese market slides
By YUZO YAMAGUCHI | Automotive News
TOKYO - The collapse of Honda Motor Co.'s sales in Japan appears to signal not a disaster but a deliberate strategy change with potential relevance for the U.S. market.
Although the carmaker won't say so outright, signs increasingly indicate that the recent drop represents a significant pullback from its previous push to achieve a record 1 million sales in the fiscal year that begins next April 1.
Honda came within shouting distance of the mark in calendar 2002, hitting sales of nearly 903,000 units. That volume made it a solid No. 2 in Japan to sales leader Toyota Motor Corp. for the third consecutive year.
But for the five months through May, Honda is off 17 percent from a year earlier, and it has surrendered the No. 2 sales spot to the resurgent Nissan Motor Co.
In May its sales tumbled 21.4 percent, the eighth consecutive monthly decline from a year earlier and the third double-digit drop in the last five months.
Takeo Fukui, Honda's new CEO, did not sound worried by falling sales at the press conference in April announcing his appointment. When asked about the prospects of making - or missing - the 1 million goal, Fukui said: "Rather than sticking to a sales goal, we should make our customers happy. Then, sales should follow."
That de-emphasis of the former target indicates a readiness to forsake the chase for marginal volume in favor of improving profits. If so, his willingness could be a clear indication of Honda's future stance in the United States if the incentive wars there escalate further.
Plunging profits
Honda's profitability in Japan has declined. In the fiscal year that ended March 31, operating profit for the parent company only, excluding overseas operations but including profits on cars exported from Japan, tumbled 22.1 percent from a year earlier to $1.2 billion.
Honda is burdened in Japan with aging models, even as its main rivals introduce strong competitors, particularly minivans.
The Odyssey, a strong seller that for several years went out the door loaded with profit-boosting options, is aging.
Toyota's Wish minivan, launched in January, is almost an exact copy of the Honda Stream and has stolen sales from it. Mitsubishi Motors Corp. and Nissan also are launching minivans this year.
To counter the fierce competition, Honda in effect has been buying sales with expensive promotions, and its dealers have resorted to sometimes-questionable tactics to hit volume targets.
The minivan wars were not such a problem for Honda last year, when it had a huge hit with the Fit, a compact car that raced to the top of Japan's best-seller list in 2002, its first full year on the market. But even the Fit's success wasn't all good news.
While the $9,700 Fit's high volumes whetted Honda's appetite for even more sales, contributing to the push for 1 million, its thin margins scraped away at the profitability of Honda and its dealers. And now the Fit is running out of gas.
Sales of the Fit plunged 27.5 percent in May, although it still ranked No. 2 behind the Toyota Corolla. Honda's minicar sales also shrank 16.5 percent ahead of the anticipated debut of a revamped Life this year.
"A small car is less expensive. That's fine," says Kenji Aizawa, president of Honda Clio Shin Kanagawa, a company that runs 15 Honda outlets in Kanagawa, a mostly upscale bedroom prefecture south of Tokyo. "But the problem is, it has become a core part of our lineup."
The Fit accounted for 31 percent of his total sales of 5,298 units in 2002, Aizawa says.
Dealership games
Dealers also took drastic steps to hit their volume targets. Honda dealers long have had a reputation in Japan for selling the deal rather than the car. But some resorted to dubious tactics recently.
Honda dealers registered new cars for their own use, perhaps as test-drive models, and then immediately moved the cars over to their used-car lots or auctions. This practice, known as "self-registration," happens periodically at almost every maker's dealerships in Japan.
This time, though, some Honda dealers went a step further. They took cars that already had been registered in the dealer's name but never used and sold them to customers as new. The dealers then skimmed off the difference between new-car and used-car sales taxes, according to the Asahi newspaper, one of Japan's influential general papers.
Honda confirmed the newspaper report, although there have been no police investigations or criminal indictments. The automaker insisted that only a handful of dealers were involved.
"We've never promoted them to do self-registration as part of our policy," said Yoshio Ito, a Honda spokesman.
Honda urged dealers involved to reimburse their customers and offer them an apology. After that, apparently, Honda began backing off its pedal-to-the-metal volume push.
When Honda's sales plunged 31.3 percent in April, the first month of the new fiscal year, analysts surmised that Honda's dealers no longer were under so much pressure that they were inflating sales numbers through self-registrations.
Honda "noticed quickly that they were wrong" in the unrelenting drive for higher sales, says Takaki Nakanishi, an analyst at UBS Warburg (Japan) Ltd. "Honda is resetting itself."
Honda is showing a newfound concern for its dealers' profitability, for example, by urging them to increase their service business.
One potential gold mine: Japan's required shaken inspection, which every Japanese car owner faces in the third year of ownership at a cost of about $850.
The more than 400,000 Fits sold since June 2001, for example, will generate about $340 million in inspection revenue over the next three years.
Honda also is backpedaling on a plan to boost its outlets in Japan to 2,600 by the end of the current fiscal year from about 2,400 last year. That could have hurt existing stores' profitability if the sales decline continued. Now it hopes to reach 2,500 in the fiscal year ending in March 2005.
Product is the answer
The real answer to Honda's woes is new product. Honda will introduce a revamped version of the Odyssey this year, one year ahead of the previous model cycle of five years. Dealers also expect Honda to come up with a minivan larger than the Odyssey next year. Other Honda minivans are expected to get face-lifts this year.
The automaker also will unveil a restyled Inspire sedan with a collision-avoidance system in June. The system uses radar to detect vehicles and calculates the distance between the vehicles, relative speeds and the anticipated vehicle path to determine the likelihood of a collision.
Due in large part to such product upgrades, UBS' Nakanishi estimates that Honda's average unit sales price in Japan will increase about $930 from a year earlier, to about $16,000 at the current exchange rate in this fiscal year.
In April, Honda also named fast-tracker Manabu Nishimae, the youngest executive on Honda's board, to head automobile sales in Japan. Nishimae, 48, already has started visiting dealers in his efforts to rebuild Honda's local business.
"I'm sure that Honda will be changing," said Aizawa at Honda Clio Shin Kanagawa.
By YUZO YAMAGUCHI | Automotive News
TOKYO - The collapse of Honda Motor Co.'s sales in Japan appears to signal not a disaster but a deliberate strategy change with potential relevance for the U.S. market.
Although the carmaker won't say so outright, signs increasingly indicate that the recent drop represents a significant pullback from its previous push to achieve a record 1 million sales in the fiscal year that begins next April 1.
Honda came within shouting distance of the mark in calendar 2002, hitting sales of nearly 903,000 units. That volume made it a solid No. 2 in Japan to sales leader Toyota Motor Corp. for the third consecutive year.
But for the five months through May, Honda is off 17 percent from a year earlier, and it has surrendered the No. 2 sales spot to the resurgent Nissan Motor Co.
In May its sales tumbled 21.4 percent, the eighth consecutive monthly decline from a year earlier and the third double-digit drop in the last five months.
Takeo Fukui, Honda's new CEO, did not sound worried by falling sales at the press conference in April announcing his appointment. When asked about the prospects of making - or missing - the 1 million goal, Fukui said: "Rather than sticking to a sales goal, we should make our customers happy. Then, sales should follow."
That de-emphasis of the former target indicates a readiness to forsake the chase for marginal volume in favor of improving profits. If so, his willingness could be a clear indication of Honda's future stance in the United States if the incentive wars there escalate further.
Plunging profits
Honda's profitability in Japan has declined. In the fiscal year that ended March 31, operating profit for the parent company only, excluding overseas operations but including profits on cars exported from Japan, tumbled 22.1 percent from a year earlier to $1.2 billion.
Honda is burdened in Japan with aging models, even as its main rivals introduce strong competitors, particularly minivans.
The Odyssey, a strong seller that for several years went out the door loaded with profit-boosting options, is aging.
Toyota's Wish minivan, launched in January, is almost an exact copy of the Honda Stream and has stolen sales from it. Mitsubishi Motors Corp. and Nissan also are launching minivans this year.
To counter the fierce competition, Honda in effect has been buying sales with expensive promotions, and its dealers have resorted to sometimes-questionable tactics to hit volume targets.
The minivan wars were not such a problem for Honda last year, when it had a huge hit with the Fit, a compact car that raced to the top of Japan's best-seller list in 2002, its first full year on the market. But even the Fit's success wasn't all good news.
While the $9,700 Fit's high volumes whetted Honda's appetite for even more sales, contributing to the push for 1 million, its thin margins scraped away at the profitability of Honda and its dealers. And now the Fit is running out of gas.
Sales of the Fit plunged 27.5 percent in May, although it still ranked No. 2 behind the Toyota Corolla. Honda's minicar sales also shrank 16.5 percent ahead of the anticipated debut of a revamped Life this year.
"A small car is less expensive. That's fine," says Kenji Aizawa, president of Honda Clio Shin Kanagawa, a company that runs 15 Honda outlets in Kanagawa, a mostly upscale bedroom prefecture south of Tokyo. "But the problem is, it has become a core part of our lineup."
The Fit accounted for 31 percent of his total sales of 5,298 units in 2002, Aizawa says.
Dealership games
Dealers also took drastic steps to hit their volume targets. Honda dealers long have had a reputation in Japan for selling the deal rather than the car. But some resorted to dubious tactics recently.
Honda dealers registered new cars for their own use, perhaps as test-drive models, and then immediately moved the cars over to their used-car lots or auctions. This practice, known as "self-registration," happens periodically at almost every maker's dealerships in Japan.
This time, though, some Honda dealers went a step further. They took cars that already had been registered in the dealer's name but never used and sold them to customers as new. The dealers then skimmed off the difference between new-car and used-car sales taxes, according to the Asahi newspaper, one of Japan's influential general papers.
Honda confirmed the newspaper report, although there have been no police investigations or criminal indictments. The automaker insisted that only a handful of dealers were involved.
"We've never promoted them to do self-registration as part of our policy," said Yoshio Ito, a Honda spokesman.
Honda urged dealers involved to reimburse their customers and offer them an apology. After that, apparently, Honda began backing off its pedal-to-the-metal volume push.
When Honda's sales plunged 31.3 percent in April, the first month of the new fiscal year, analysts surmised that Honda's dealers no longer were under so much pressure that they were inflating sales numbers through self-registrations.
Honda "noticed quickly that they were wrong" in the unrelenting drive for higher sales, says Takaki Nakanishi, an analyst at UBS Warburg (Japan) Ltd. "Honda is resetting itself."
Honda is showing a newfound concern for its dealers' profitability, for example, by urging them to increase their service business.
One potential gold mine: Japan's required shaken inspection, which every Japanese car owner faces in the third year of ownership at a cost of about $850.
The more than 400,000 Fits sold since June 2001, for example, will generate about $340 million in inspection revenue over the next three years.
Honda also is backpedaling on a plan to boost its outlets in Japan to 2,600 by the end of the current fiscal year from about 2,400 last year. That could have hurt existing stores' profitability if the sales decline continued. Now it hopes to reach 2,500 in the fiscal year ending in March 2005.
Product is the answer
The real answer to Honda's woes is new product. Honda will introduce a revamped version of the Odyssey this year, one year ahead of the previous model cycle of five years. Dealers also expect Honda to come up with a minivan larger than the Odyssey next year. Other Honda minivans are expected to get face-lifts this year.
The automaker also will unveil a restyled Inspire sedan with a collision-avoidance system in June. The system uses radar to detect vehicles and calculates the distance between the vehicles, relative speeds and the anticipated vehicle path to determine the likelihood of a collision.
Due in large part to such product upgrades, UBS' Nakanishi estimates that Honda's average unit sales price in Japan will increase about $930 from a year earlier, to about $16,000 at the current exchange rate in this fiscal year.
In April, Honda also named fast-tracker Manabu Nishimae, the youngest executive on Honda's board, to head automobile sales in Japan. Nishimae, 48, already has started visiting dealers in his efforts to rebuild Honda's local business.
"I'm sure that Honda will be changing," said Aizawa at Honda Clio Shin Kanagawa.
06-17-2003, 12:31 PM
#3
Cost Drivers!!!!
Thread Starter
ABreece,
agreed. Honda knows this is an issues. Brand name means everything and everything i've read over the past 6 months indicates there is major shift in focus for the all-around customer experience from the product which is built to the sales tactics used by Honda and Acura dealerships.....of course not every dealership complies but Corporate realizes there is a problem and seems to making changes.
You can see the shift in focus in the build materials, quality of the TSX and new accord.
agreed. Honda knows this is an issues. Brand name means everything and everything i've read over the past 6 months indicates there is major shift in focus for the all-around customer experience from the product which is built to the sales tactics used by Honda and Acura dealerships.....of course not every dealership complies but Corporate realizes there is a problem and seems to making changes.
You can see the shift in focus in the build materials, quality of the TSX and new accord.
06-17-2003, 01:49 PM
#5
Suzuka Master
Originally posted by Zapata
ABreece,
agreed. Honda knows this is an issues. Brand name means everything and everything i've read over the past 6 months indicates there is major shift in focus for the all-around customer experience from the product which is built to the sales tactics used by Honda and Acura dealerships.....of course not every dealership complies but Corporate realizes there is a problem and seems to making changes.
You can see the shift in focus in the build materials, quality of the TSX and new accord.
ABreece,
agreed. Honda knows this is an issues. Brand name means everything and everything i've read over the past 6 months indicates there is major shift in focus for the all-around customer experience from the product which is built to the sales tactics used by Honda and Acura dealerships.....of course not every dealership complies but Corporate realizes there is a problem and seems to making changes.
You can see the shift in focus in the build materials, quality of the TSX and new accord.
What i wish is that i didn't have a ticking timebomb for a tranny. I just know that it will explode shortly after i hit 100k miles.
But, since the CL is discontinued, i guess they don't need to worry about making us happy.
06-17-2003, 01:53 PM
#6
Cost Drivers!!!!
Thread Starter
Originally posted by soopa
sounds like "fluffer" material to me.
ill believe it when i see it...
sounds like "fluffer" material to me.
ill believe it when i see it...
agreed. I know there is a new program which sales people are attending and i've seen the difference in the way they are treating potential customers. I've experienced that difference at a few diff dealerships. However, the real pain that most people have complained about is the lack of QC at the dealership SERVICE level. That's where some major changes need to take place. I travel 1.5 hrs up to PAA for service when there are 4 Acura dealerships in my area. I usually spend a half a day just for a service trip. Don't get me wrong, it's worth it but it's PLAIN STUPID that i have such little confidence in people aside from PAA. It's shameful.
06-17-2003, 04:06 PM
#7
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think the improvement in quality of the tsx or accord is due to them being new cars, not a new honda philosophy. most new cars are of higher quality compared to the perevious gen.
the rest seems like an excuse for sales being down. they were pushing too hard which resulted in bad business tactics so they cut back the pressure and are going to let the products sell themselves 'more'.
the acura dealer i was in was totally no pressure, thought the salesman was going to pour a couple of beers. the honda dealer was another story, sell sell sell, msrp, no deal, that ad in the paper was a misprint, bla.
the rest seems like an excuse for sales being down. they were pushing too hard which resulted in bad business tactics so they cut back the pressure and are going to let the products sell themselves 'more'.
the acura dealer i was in was totally no pressure, thought the salesman was going to pour a couple of beers. the honda dealer was another story, sell sell sell, msrp, no deal, that ad in the paper was a misprint, bla.
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06-17-2003, 04:29 PM
#8
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It's total bullshit. You could speculate that a drop in quality at home and abroad has been affecting sales. Rather than admit it, they're changing the message to make it look as if it's all part of a grand scheme and that they're willing to sacrifice sales to improve quality. If they have the capacity to build 1MM cars, there's nothing to prevent them from building them -and- focusing on quality. I highly doubt the speed at which cars are built in Honda's plants (which are highly automated anyway) has a direct impact on quality. I'm picking up a V70R tomorrow, I'm anxious to see what type of build quality I'll get from Volvo.
06-17-2003, 06:26 PM
#9
Cost Drivers!!!!
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BarryH,
bullshit why? There has been an overall drop in quality from Honda. Industry research shows that people don't see HOnda in the same light. Being on the board as long as i have I can say without question that people do not view honda/acura in the same light as they did before. Surveys like JD Power etc., show the customer base isn't happy.
Proof is in the pudding, we'll see what shakes down.
Btw, you are going to manufacturer which has no been in the clutches of FORD.
bullshit why? There has been an overall drop in quality from Honda. Industry research shows that people don't see HOnda in the same light. Being on the board as long as i have I can say without question that people do not view honda/acura in the same light as they did before. Surveys like JD Power etc., show the customer base isn't happy.
Proof is in the pudding, we'll see what shakes down.
Btw, you are going to manufacturer which has no been in the clutches of FORD.
06-17-2003, 07:48 PM
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WHat I got from it is Honda will focus more on the American market since we buy more expensive Hondas thus more profits. The profit on a Jazz or say Vita is like $5.
06-17-2003, 08:20 PM
#12
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Originally posted by Zapata
BarryH,
bullshit why?
BarryH,
bullshit why?
Btw, you are going to manufacturer which has no been in the clutches of FORD.
06-17-2003, 10:07 PM
#13
Senior Moderator
Originally posted by soopa
sounds like "fluffer" material to me.
ill believe it when i see it...
sounds like "fluffer" material to me.
ill believe it when i see it...
When my brother told a co-worker about Acura replacing one of the lower control arms on my 03 CLS, he got an ear full about the co-workers problems w/ an 03 Accord coupe.
Honda had to replace the steering rack twice (the first one was defective out of the box). And then he had to get the rear window seal replace 'cause he was getting an awful whistling noise above 80mph.
Minor problems are gonna turn up on any new car, but if your talking replaceing major front supension peices, then there might be a problem w/ the manufactor.
Sounds to me like the usual propaganda BS.
06-17-2003, 10:32 PM
#14
Cost Drivers!!!!
Thread Starter
Scaling back production numbers is only a part of the equation according to the new move by honda. Of course scaling production back without taking advantage of the time gained to do the necessary QC would be pointless but why would Honda NOT DO THE NECESSARY!!!!!!! If you are unwilling to believe for whatever reason that Honda doesn't do this then go right ahead.
I agree the build quality, materials etc., are not what Honda/Acura should be. It is not what thought i was going to get when i bought the car i did. What I am telling you is the Honda is suffering because of their mistakes and really have no reason to believe that a company would just stick a gun to its own head and not do or change anything.
TSX is of EXCELLENT and i mean EXCELLENT quality. I was completely and utterly floored when I saw it, felt it, drove it. I wasn't expecting anything spectacular but for me the proof was in the pudding.
If i understood some past articles correctly, then I believe production of the TL will move back to Japan and the production lines in the states will be replaced with Honda/Acura "TRUCKS". MDX/PILOT/model X/ model X.
we shall see.....
good luck with the new car!
I agree the build quality, materials etc., are not what Honda/Acura should be. It is not what thought i was going to get when i bought the car i did. What I am telling you is the Honda is suffering because of their mistakes and really have no reason to believe that a company would just stick a gun to its own head and not do or change anything.
TSX is of EXCELLENT and i mean EXCELLENT quality. I was completely and utterly floored when I saw it, felt it, drove it. I wasn't expecting anything spectacular but for me the proof was in the pudding.
If i understood some past articles correctly, then I believe production of the TL will move back to Japan and the production lines in the states will be replaced with Honda/Acura "TRUCKS". MDX/PILOT/model X/ model X.
we shall see.....
good luck with the new car!
Originally posted by BarryH
You missed my point. Scaling back production in a highly automated plant isn't going to help quality. Design, engineering, and materials are where Honda's dropped the ball. $30K+ cars shouldn't have transmissions and brakes designed to meet minimum requirements. Had Honda not been so cheap, our rotors wouldn't be warping and transmissions falling out. Producing less cars isn't going to address the quality problems Honda's currently experiencing. We'll see if they've learned anything when the new TL comes out. I haven't been tracking the new Accord so I don't know how the market is reacting to it in terms of quality.
Volvo's been doing well in the J D Powers standings. I saw my car yesterday and the build quality appears excellent. The interior workmanship and materials are fantastic. Ford is taking best practices from Volvo, not the other way around. ALso, the dealers been incredible to work with - night and day over the four Acura dealers I've worked with in three different cities. Volvo's been consistantly profitable and is known for their advanced manufactuing techniques. I've never owned a Volvo so can't comment on the brand from experience. I'm about to find out though. By the way, I'll race you with my 300HP, 6-Speed, AWD, Brembo-equipped Volvo anyday!
You missed my point. Scaling back production in a highly automated plant isn't going to help quality. Design, engineering, and materials are where Honda's dropped the ball. $30K+ cars shouldn't have transmissions and brakes designed to meet minimum requirements. Had Honda not been so cheap, our rotors wouldn't be warping and transmissions falling out. Producing less cars isn't going to address the quality problems Honda's currently experiencing. We'll see if they've learned anything when the new TL comes out. I haven't been tracking the new Accord so I don't know how the market is reacting to it in terms of quality.
Volvo's been doing well in the J D Powers standings. I saw my car yesterday and the build quality appears excellent. The interior workmanship and materials are fantastic. Ford is taking best practices from Volvo, not the other way around. ALso, the dealers been incredible to work with - night and day over the four Acura dealers I've worked with in three different cities. Volvo's been consistantly profitable and is known for their advanced manufactuing techniques. I've never owned a Volvo so can't comment on the brand from experience. I'm about to find out though. By the way, I'll race you with my 300HP, 6-Speed, AWD, Brembo-equipped Volvo anyday!
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