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Honda to Trim Production of Its Flagship Sedan

The auto maker will stop making its Accord for 11 days through July to align production with market conditions

March 27, 2018

Workers assembling Honda Motor Co.’s Accord will take off a total of two weeks from building the sedan over the next several months as the auto maker works to adjust bloated inventories.

Unlike Detroit auto makers that have either eliminated entire sedan lines or slowed down sedan production over the past year, Japanese, German and Korean auto makers haven't taken their foot off the pedal.

Just this year through February, Honda, Toyota Motor Corp. and Nissan Motor Corp. have collectively sold about double the amount of sedans in the U.S. compared with the Big 3 Detroit auto makers, according to Autodata Corp.

A Honda spokesman said its Marysville, Ohio, plant will stop production a total of 11 days through July, which includes two days a month April through June and then an additional five days following the typical summer shutdown at the beginning of July.

The plant’s 4,200 employees have the option of taking vacation days, unpaid days or coming into work to do other tasks.

The spokesman said the reason for stopping production is to “focus on aligning production to current market conditions.”

Honda’s dealer inventory of the Accord was over 100 days’ supply in February, much higher than what’s considered healthy for the industry, according to data from WardsAuto.com.

The Japanese auto maker’s Ohio plant began producing the redesigned 2018 Accord in September, and the auto maker invested a total of $267 million and added 300 new jobs to support Accord production at the vehicle assembly plant and at its engine plant in Ohio.

The Marysville plant, located about 30 miles northwest of Columbus, also produces the auto maker’s luxury brand Acura TLX and ILX sedans.

Honda’s big bet on sedans comes at a time when consumer preference is rapidly shifting to trucks and SUVs amid low gasoline prices. The Accord launched around the same time as its biggest rival, Toyota’s Camry family sedan, was also redesigned.

Year to date through February, sales of the Accord are down 12.9% to 37,430 units sold. Toyota, meanwhile, has seen a 2.3% increase in Camry sales through February to 48,929 vehicles.

Nissan will also slow production at its plant in Tennessee, which produces a number of vehicles including the Altima and Maxima sedans, along with the Rogue crossover, among others. Dan Mohnke, Nissan’s head of sales in North America, said in an interview last week that the auto maker will slow the speed of its lines to reduce inventories by about 15% through June.

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The Car of the Year That Few Americans Want

April 27, 2018

Honda Motor Co. is learning that making an award-winning sedan isn’t enough in a U.S. market where the pickup truck is king.

The new Accord received rave reviews when it went on sale in October and won North American Car of the Year at the Detroit auto show in January, but the customers haven’t followed.

The reason: it is too pricey.

“Everybody tries to launch a new product with no incentives. Customers wait,” said Mike Maroone, a former president of AutoNation Inc. and Honda dealership owner in Colorado.

Sales of the Accord are down 12% in the first three months of the year compared with the corresponding period last year, when dealers were selling the old model. Meanwhile sales of its main competitor, Toyota Motor Corp.’s Camry, are up around 9%. That endangers Honda’s strategy of trying to grab a larger share of the shrinking sedan market and offset its inability to make enough sport-utility vehicles.




The company on Friday said its operating profit in North America fell 30% in the year ended March 31, and it said it would make some crossover sport-utility vehicles at an Ohio plant that makes Accords.

Until now, the company has said it sees an opportunity in Detroit’s withdrawal from the car market. Ford Motor Co. said Wednesday it would soon stop selling all sedans except the Mustang and a version of the compact Focus.

The problem is other Japanese car makers have the same idea — especially Toyota, which hopes it can expand its market share in sedans as competitors drop out.

Early signs suggest the winner is the car maker with the best deals — Toyota. The Accord, whose price starts at $23,570, had a 10% share of the midsize sedan market in the first three months of the year, while the Camry accounted for 15%, according to data from Jefferies. Toyota spent an estimated $2,557 on Camry incentives in March, compared with around $848 for the Honda Accord.

This month, Honda sweetened its financing offer to try to match Toyota’s cheaper lease deals in some parts of the U.S. That’s exactly what Honda executives had said in February they would try not to do. At the time, Honda said it hoped the Accord would sell on its own merits.

Seiji Kuraishi, chief operating officer, said Friday that the company still didn’t want to cut prices too much.

“Basically, as I said before, we are hoping not to be involved in a discount race and that policy hasn’t fundamentally changed,” Mr. Kuraishi said. “We hope to bring out the charm of the new model.”

Accords began to pile up on dealer lots early this year as sales lagged behind. In March, Honda dealers had 112 days’ supply of the Accord, far above what many analysts consider healthy. Honda is now slashing production of the vehicle as it tries to trim back supply.

Meanwhile, Honda can’t build enough of its most popular vehicles in the U.S. The company can produce around 240,000 of its CR-V and Acura RDX crossover SUVs annually at its plant in East Liberty, Ohio. Last year, it sold 430,000 in the U.S.

A neighboring plant—the one that will be partially converted to crossover SUV production—can produce 440,000 Accords. Honda sold 320,000 in the U.S. last year.

Dealers say that customers for the Accord are starting to show up after Honda’s increased generosity.

At a recent meeting between dealers and Honda executives that resulted in the boosted financial incentives on the Accord, the discussion was “spirited,” said Brian Benstock, vice president at Paragon Honda in Queens, N.Y. “Dealers always want more,” he said.

Mr. Benstock said Honda was right to try to limit the deals it offers on the Accord because they can hurt in the long run by cheapening the brand and lowering resale values. Used Hondas tend to be more expensive than their competitors.

But that may not matter if customers don’t come in the first place. Competition in the sedan market is set to intensify with Nissan Motor Co. introducing its latest Altima in the fall.

Reporting full fiscal-year earnings on Friday, Honda said its profits rose sharply on the back of tax changes in the U.S. The company expects a tougher road ahead, predicting that its operating margin would dip to 4.5% in the current fiscal year from 5.4% in the year ended in March.

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