AUTO SALES: Game is changing as Honda hits slump

Even successful brands can become stale
March 30, 2005

BY SARAH A. WEBSTER
FREE PRESS BUSINESS WRITER



For decades, a conventional wisdom has loomed over the Motor City: The Japanese Big Three are taking over the United States auto market and Detroit's old Big Three are destined for oblivion.


But with Honda sales taking a surprising downturn this year and Chrysler sales on a steady upward trajectory, there's a new motto in town: There are no favorites in this dog-eat-dog auto market.


"There are pressures on Honda -- just like everybody else," said Michael Robinet, vice president of global vehicle forecasting at CSM Worldwide in Farmington Hills.


Honda's sales decline of 8.3 percent in the first two months of the year is practically in lockstep with that of General Motors Corp. and Ford Motor Co. Their sales are off 9.9 percent and 7.4 percent, respectively.


In this brutal marketplace, it seems the right or wrong products can swiftly swing the fortunes of any automaker, no matter how strong or weak their foothold in the marketplace might seem. So if a stale Accord and Civic can shake the stalwart Honda brand, as is clearly the case, a few key products surely could rescue Detroit's ailing automakers.


The former Chrysler Corp., now a division of the German DaimlerChrysler AG, is proof of that. A few cool products, such as the Chrysler 300 and Dodge Magnum, have moved what is now the Chrysler Group from a string of financial, sales and market-share losses to an impressive list of gains these days.


Meanwhile, the blame for Honda Motor's performance this year largely falls on the flagship Honda brand, its resistance to offering big rebates, and the fast-declining popularity of its two best-selling vehicles -- the long-dependable Accord and Civic cars.


Sales of Honda's Acura luxury vehicles are up 5.4 percent for the first two months of the year, compared with last year. But Honda division sales are down a stark 10.6 percent during the same period.


Although the automaker is still profitable, the Honda brand seems to be losing some appeal with U.S. consumers. For the year through February, the Honda brand's share of the U.S. market fell to 6.5 percent from about 7 percent a year ago.


Dick Colliver, executive vice president of American Honda Motor Co. Inc., acknowledged the new competitive pressures.


"We've been fighting that battle to hold our sales up," Colliver said. "Are we concerned? Yeah, we're concerned. Are we going to panic? No."


Automakers report their monthly sales results on Friday, and Colliver predicts the company will report a sales gain in March, compared with the same month a year ago. Despite that, he said that Honda's sales and market share are still likely to be down for the 2005 first quarter.



Competition hurts car sales
Honda's trucks aren't the big problem. While the CR-V and Element SUVs are down for the year, the Pilot SUV and Odyssey minivan are more than offsetting those losses. Honda truck sales are up 4 percent for the first two months of the year.


Honda car sales, meanwhile, are in the tank -- down 20.7 percent.


"Passenger cars is where we're seeing the biggest competition," Colliver said, "and that's where we've started shifting a lot of our focus -- back to those two car lines."


The Accord was the fifth-best-selling vehicle in the United States last year, while the Civic ranked eighth. But sales of the Accord were down 15 percent for the first two months of the year, and sales of the Civic were off 26.9 percent. That dropped the Accord to the sixth-most-popular vehicle in the United States this year, with the Civic in 11th place.


Joe Phillippi, president of Auto Trends Consulting Inc., an automotive research firm in Short Hills, N.J., blamed Honda's troubles on bland styling with the Accord, which is now in the third year of its current body style, and the Civic, which is in its fifth and final year.


He also said a suspension change in the Civic, which affected its handling, also was rejected by young buyers who like to customize the vehicles.


Today's tough market, he said, demands a great and complete package: looks, brains, power and reliability -- all at the right price.


"There's a growing number of sexy-looking vehicles out there," Phillippi cautioned.


Dealerships also need to be able to close deals in this tough environment.


"Honda dealers aren't used to having to push a vehicle," said Alan Baum, director of forecasting at the Planning Edge in Birmingham. "They're used to a vehicle selling itself."


Colliver said Honda has plans to correct its troubles.


"We may have been a little conservative with the '01 Civic and the '03 Accord," he said. "We've started addressing that."


Indeed, a funky, more powerful Civic is on its way.


The automaker revealed a Civic Si concept at the Chicago Auto Show last month that is a thinly disguised version of the all-new 2006 Civic coupe that will be available in the fall, along with an all-new Civic sedan.


The Si concept is aggressively styled, with an extremely short hood, a dramatically sloped windshield and a sporty rear wing.


"It's a major change for us," Colliver said.


Phillippi said the Civic concept reveals that Honda has "gotten the message" the market has been sending by rejecting its cars.


A freshened-up version of the Accord also will be available by the end of the year, sooner than originally planned. Colliver also noted that Honda recently released two new Accord models -- a special edition coupe and value package sedan -- to give sales a lift.


"We know we've got to freshen the product up," Colliver said. "We need to do some things to get us a little more competitive in the marketplace."


Colliver said the company is still on target to sell 300,000 Civics and 400,000 Accords this year. And another boost may come from the new Honda Ridgeline pickup, with an inventive trunk in its bed, which just hit showrooms. The automaker expects to sell 50,000 over the next year.


But in the coming years, Honda may have to tweak its image, as well.



New marketing strategy
Robinet said the Honda name still has plenty of brand value in the market. But the name largely has been built on the company's reputation for dependable, reliable, high-quality vehicles.


As the quality of all vehicles sold in the United States starts to balance out, Honda will have to find another hook for reeling in customers.


The quality difference between all-new vehicles today is minimal -- so small that they are measured in fractions.


With these differences becoming progressively negligible, and customers slowly beginning to take notice, automakers who have long set themselves apart for their quality -- especially Toyota Motor Corp. and Honda -- must find new selling points, Phillippi said.


Typically when automakers don't have just the right mix of styling cues, power train, quality reputation or other features, they turn to discounts to lower the price and offset their shortcomings. Honda, however, largely has resisted offering cash-back rebates and other special incentives.


It's clear that Honda is thinking about them, though.


"We see some people walking from our dealerships because we don't offer incentives," Colliver conceded.


Of the nation's Big Six automakers, Honda offers the lowest incentives. Its rebates and other incentives averaged $781 for the first two months of the year, according to estimates by Autodata Corp. of Woodcliff Lake, N.J. Automakers do not publicly release how much they spend on incentives.


Even Toyota incentives are up 18.8 percent for the first two months of the year, to an average of $1,016 per vehicle.


So for consumers choosing between two quality leaders such as Toyota and Honda, a discount offered by Toyota may be a deal-breaker.


"If Honda was willing to play the incentive game, they could be doing far better than they currently are," said Joe Barker, manager of North American sales analysis for CSM Worldwide in Farmington Hills. "They're just not willing to play the incentives game."


Colliver said that Honda recently has ramped up behind-the-scene incentives to dealers to about $300 per vehicle on the Accord and Civic. But with the new Civic and freshened Accord not slated to hit showrooms until fall, the company may have a long, long summer selling season ahead.


Cars typically sell better in the summer months. But if Honda car sales don't pick up soon, bigger incentives could be in the offing.


Said Colliver: "Never say never."

http://www.freep.com/money/autonews/...e_20050330.htm

 

sweet......looking for an accord v6(maybe hybrid) sedan. It's a buyers market.

 

That new Civic and Accord refresh are not coming soon enough.

The days of "bland is good enough" are over.

 

I hope Honda can hold out and NOT offer cash back on their cars. I would rather see lower sales till the redone models in the fall than lower the resale values of existing owners.

I hate the fact that others (Big Three especially) have to offer such killer cash back offers to move their crappy vehicles.

 

the current accord is just ugly thats why. the current civic is in its last yr of production so at least it has an excuse.

 

 

I don't think cash incentives hurt resale on quality cars, it just allows them to compete. I'm glad Honda is having to deal with this, they and their dealers are too cocky about the products they offer.

Didn't realize the Accord was up for another refresh in the fall considering the 05 had some minor work.

 

I dont think it's 100% accross the board. But I have to admit the new hyundai I was in this week was built as well as my CLS.

 

Not that I'm in the market for a Civic, but I thought Honda made a big mistake by moving away from the double wishbone suspension - they need to bring it back.

 

agreed. teh new one rids like crap compared to the previous gen's.

honda needs to wake up and start getting good stimulating products back out there

 

Cash incentives DO hurt resale.

Your perception of cockiness = your inability to properly negitiate.

That is all.

Honda will be fine.

 

Being conservative and boring isn't the issue obviously, since that doesn't hurt toyota, which are far more boring to look at and drive. If anything it's the greedy ass consumers expecting huge discounts since everyone else does it.

 

When Honda claimed that the 2003 Accord had "cheetah-like" "agressive" styling who here really believed it? The car is just plain ugly, there's no doubt about it. I'd still get it over a Camry but I guess Toyota owners are just so used to bland cars that they REALLY don't care.

The Civic has also become uncompetitive after all these years, they need to make the styling more appealing and inject some value, in addition to the suspension change.

But while slumping sales of the Civic come at the end of its regular life-cycle, you can see that the Accord has aged much faster. There's no question for me it's because of the styling. How can it be that the european Accord has so much more style than the US version???

 

The Accord, especially the coupe, does have the cheetah look to it, from a front view that is. But I have issues with the rear and the grille. Just put the friggin H logo back in the center of the grille where it's supposed to be. Why does it have to be sinking into the front bumper? And change those taillights.

Other than that the Accord is a really good car.
So is the Camry, unfortunately, and Toyota dealers can give you a better deal on a Camry.

 

it is out and been out for at least 6 months

 

No surprise. Most things European tend to have more style than the stuff we have here.

 

i am sure he is already aware of that.

 

oh yes, definitely aware Just waiting for the right time in the market.

 

Honda probably won't be so conservative in the designs of the next generation of Accord and Civic. I think the new Civic Si shows that they are aware of the threat from Scion, Cobalt SS, etc.


Monday, April 4, 2005


Honda focuses on R&D to keep its creative edge

Carmaker to focus on uniqe and fuel-efficient cars as competition in that area increases.

By Chang-Ran Kim / Reuters



TOKYO -- Since it began knocking together motorbikes at the end of the Second World War, Honda Motor Co. has striven to keep pace with bigger and wealthier auto makers by its creativity and focus on innovative technology.

Now, more than ever, Japan's number-three car maker says a renewed drive to bring its R&D and production operations closer together are crucial to thriving in an industry where the race to develop unique and fuel-efficient cars has intensified.

"We're at a critical juncture where we have to really fortify the link between R&D and production," said Motoatsu Shiraishi, a senior executive who took over Honda's R&D unit last Friday.

"For example, when hybrid and fuel-cell cars become more common, it won't be enough to come up with a better product at the research level. We have to make it commercially viable when it's mass-produced," he said in a recent interview.

On the research front, Honda, ranked eighth in the world in car sales volume, is well ahead of the pack.

In 1999, the maker of the popular Accord saloon released the U.S. market's first gasoline-electric hybrid car; most rivals have yet to offer one. It is also alone with a marketable fuel-cell vehicle that can be driven in freezing temperatures.

But as rivals gear up to bring their next-generation cars to market, Honda expects to face heightened competition. While most of its peers have formed capital and technical ties to speed up development, Honda has, typically, chosen to go it alone.

That independence means Honda can't reap the kind of cost savings that Nissan Motor enjoys by buying common parts with partner Renault to take on General Motors, Toyota and others.

"We are small and weak when it comes to scale. A company like ours has to compete by staying one step ahead of the rest in the field of technology," Shiraishi said, stressing that a closer link between R&D and production was a must.

His posting as president of Honda R&D is a case in point.

The 58-year-old Aichi native has spent all of his 36 Honda years in production engineering. He now replaces Takanobu Ito, who switches to head production at the Suzuka factory, Honda's biggest in Japan.


Planes, Droids and Automobiles


For Honda, the R&D field has never been too broad. It famously dabbles in jet engines and humanoid robots, while also conducting research into bio-fuels and solar power, among others.

While Honda has done well business-wise -- it has never posted a loss and is valued at $48 billion, second only to Toyota in the global auto industry -- some critics have wondered whether the quirky carmaker is spreading its resources too thinly.

But insiders point out that Honda's R&D spending is comparable to rivals', at around 5 percent of revenues. More importantly, the outlays yield dividends for its core motorcycle and car making businesses, they say.

As cars become more computerised, the technological know-how gained from developing robots -- such as voice and visual recognition skills -- comes in handy; the aircraft business gives Honda valuable insight into reducing the weight of cars.

That kind of edge and creativity are crucial for Honda, whose car business lacks the broad engine or chassis line-up to compete head on with bigger and deeper-pocketed rivals.

When it comes to creativity, Honda is a trend-setter.

In the early 1990s, with observers wondering when Honda would enter the "one-box" van-type family car segment that was taking Japan by storm, its answer in 1994 was a whole new concept: the Odyssey, which ignited the minivan boom that is still going strong in the world's second-biggest car market.

But being first hasn't always worked to Honda's advantage.

Competitors sometimes followed with similar products at a lower price and with more add-ons.

Kunimichi Odagaki, a senior official at Honda R&D and creator of the Odyssey, says that as an engineer, there's a certain sense of satisfaction from being imitated by a rival.

"But for competition's sake, it's also important to develop something that can't easily be copied," he added.

For Honda, that means building more cars like the Odyssey and fewer like the Stream multi-purpose vehicle, which was quickly outsold by a similar Toyota model.

Judging by Honda's recent creations, the signs are good.

After criticism from some quarters that it was taking too long to enter the soaring U.S. pickup truck market, Honda floored car enthusiasts with the Ridgeline, a vehicle it calls the "sport utility truck" which hit showrooms last month.

On top of having all the towing power of a half-tonne truck despite a smaller V-6 engine, the Ridgeline featured innovations such as a lockable trunk in the truck-bed and a tailgate that also swings open to the side -- while keeping to Honda's dictum of only making vehicles that handle like a sporty car.

"Our goal is to come up with concepts that make people say, 'Why didn't anyone think of this before?'," Odagaki said.

"That's what's unique about Honda and that's where our strength lies."

 

I'm glad they are revamping the Accord style, it's overweight, ugly, and that most hideous Accord generation ever.

I hope Honda goes back and make the styling more like Euro or follow some styling cues from the G35 or the new GS.