DEI99662

NEW YORK (Fortune) -- For the past decade, Honda has been out of step with most of its North American competitors - sometimes defiantly so.

While other automakers rushed to beef up their pickup trucks and SUVs with stronger frames and bigger motors, Honda (Charts) stood to one side, refusing to develop either a V-8 engine or a traditional body-on-frame light truck. Likewise, when other manufacturers engaged in a horsepower race to lure consumers and take advantage of cheap gasoline, Honda held back. Staying true to its philosophy of "maximum man, minimum machine" it concentrated on smaller, more efficient four- and six-cylinder engines.

Finally, while other automakers reluctantly explored internal combustion alternatives like gas-electric hybrids and fuel cells, Honda plunged all the way in, launching research efforts into everything from clean diesels to hydrogen power.

Honda's decision to stick with what it believes in is now paying off big time. Look at what happened in July. For its first quarter, Honda reported sales up 15 percent and operating profit up 19 percent. The Honda Accord and Civic ranked as the second and fourth best selling passenger cars in America. In a U.S. market where overall sales fell 17.4 percent, Honda brand vehicles rose 6 percent.

To cap off a remarkable performance, Honda passed Chrysler Group in sales for the first time in history, coming in fourth behind General Motors (Charts), Toyota (Charts), and Ford (Charts).

Unlike richer and more powerful Toyota, which matches American producers car for car and truck for truck, Honda has succeeded by remaining very much a focused Japanese-style company. It maintains a relatively modest product line that it sells in high volume around the globe. Its concessions to American tastes, like the Element SUV and Ridgeline pickup, seem almost like afterthoughts.

Uniquely among the world's automakers, Honda thinks of itself as an engine company first, and still maintains a sizeable business in motorcycles, lawn mowers and marine motors.

As a result, Honda's percentage of light truck sales is the smallest in the industry at 42.7 percent (compared with Chrysler and Ford at around 66 percent). - a good place to be with truck sales falling. And it has the highest corporate average fuel economy and, not coincidentally, the highest median household income for buyers - $87,907. By comparison, GM checks in at $75,888.

The recent spur to Honda's success has been $3 per gallon gasoline, but this has been a case of good planning rather than good luck. With its twin corporate pillars of improving safety and sustainability, Honda has been a consistent striver after ways to limit gasoline consumption, sometimes to its embarrassment.

While it was the first company to market a hybrid-electric car, the lozenge-shaped two-seat Insight it introduced was more test-bed than consumer product and quickly lost the publicity battle to Toyota's more practical Prius. Ironically, subsequent Honda hybrids failed to make much headway either because they looked too much like conventional cars or weren't engineered to provide maximum fuel economy. But Honda has persevered and its Civic hybrid has become a big seller.

Looking ahead, Honda is planning a big worldwide expansion. It plans to boost annual sales to 4.5 million by 2010, up from 3.4 million last year. About a third of that growth will come in North America, where it will build a sixth assembly plant, this one in Indiana. Honda's new factories potentially offer around a 20 percent improvement in productivity compared with existing sites.

Coming on the product front is yet another new hybrid, this one to be smaller and more affordable than the Civic, and three new diesel-powered vehicles.

Honda still likes to do wacky engineering projects that detour it a long way from the car business. The company spent several years developing a sophisticated walking robot called Asimo that it exhibits to school groups. And it just announced plans to enter the market for small business jets by introducing one with space for up to seven passengers.

But given the company's remarkable record of anticipating customer demand, who knows? Both could turn out to be profitable ventures.

http://money.cnn.com/2006/08/11/news...tune/index.htm

CGTSX2004

iTrader: (1)

:ibgilbocomestobashhonda:

mrdeeno

So...an automaker that spends money to try to predict and chase the ever changing market is a bad thing, while an automaker that sits by as the market changes, saving money but also forgoing profits, is good?

The market functions in cycles. Before, it was high powered V8's with RWD. Then it was fuel efficient econo-boxes, then it was FWD family sedans, then it's minivans, then it's trucks and V8's. The market is never constant.

A company like Toyota spends money on chasing the market (trucks, suvs, etc.) and makes more money, so they can focus on other technologies such as hybrids and engine technology for when the market changes so they can continue to make money...and even if a market doesn't favor trucks/SUVs, they at least have this in their arsenal in case the market starts favoring trucks/SUVs again. This is my definition of a "flexible" automaker...one that can adjust to market conditions and make money, no matter what those conditions are.

A company like honda doesn't want to invest in trucks and V8s, and they were late to the SUV party and lost out on profits early on until they had an SUV. They continue to focus on fuel efficient vehicles, and it's great and all when the market favors fuel efficient vehicles, but if and when the market changes in favor of trucks/SUVs, they are SOL because they don't have that technology in their arsenal. some may argue that Honda is too small an automaker to chase the market like Toyota, but I believe otherwise and that Honda only chooses not to chase the market.

So when the market starts to fall out of favor with fuel efficiency and starts favoring something else (maybe V8's, SUVs and trucks again, or RWD, or performance, or whatever), instead of "The world catches up to Honda", will we be reading "Honda has a lot of catching up to do"?

Even a broken clock is right twice a day...

mrdeeno

personally, i'm not necessarily bashing honda...i would just rather see the advantages AND disadvantages of honda's strategy.

F23A4

I could not have stated that better myself.

CGTSX2004

iTrader: (1)

is your name gilbo?

And at least you have constructive criticism. Gilbo never has anything useful to say. In fact, I'm starting to wonder if he's actually just an anti-Honda bot somebody programmed.

mrdeeno

^^ no, but i just wanted to set the tone before people start bashing me for bashing honda.

TylerIS1

Gas is not going to get any cheaper, Honda saw this coming years ago as did everyone in the energy industry. Definitely smart planning on their part.

corey415

I must admit that it is sometimes annoying that Honda is so stubborn (no V8, no RWD coupes/sedans).

But that's the Honda way; to be super conservative. That's why they have always profited every year they have been in business.

mrdeeno

I don't think Honda saw this coming at all. It was the corporate strategy to always focus on fuel efficiency, whether gas prices were cheap OR expensive. That's why in the hay-day of SUV's and trucks, Honda didn't have anything except rebadged Isuzu troopers and rodeos. Honda made a bet on fuel efficiency, and this market cycle may pay off. Other times (like during the SUV craze), honda's fuel efficiency bet didn't pay off...did they see that coming?

Besides, adjusted for inflation, gas is still pretty damn cheap. It's just that people were used to cheapER gas.

Like i said before, even a broken clock is right twice a day...not to say that Honda is a broken clock or anything, but you get the idea i hope.

gilboman

they didnt plan anything...toyota did..and are reaping the benefits.

if they did plan it, they would've capitalized on the SUV craze (like toyota) and the MPG centric phase now (like toyota)

instead honda stood by then and now. if honda did anticipate MPG concerns..they would not be behind toyota in hybrids especially if they "planned" for it when toyota was pumping up its truck line

gilboman

useful is subjective. if you dont agree with something you call it not useful.

biker

Never a dull moment when gilbo makes an appearance.

Regardles of vehicle lineup, the point is that Honda makes money and their cars are in demand.

Moog-Type-S

..just to chime in...Honda was late to the minvan craze too.

oem tsx

mrdeeno is probably jaded because honda doesnt trust mexico to produce their cars like domestic and german manafacturers.

corey415

Honda does actually make cars in Mexico, but they are for the South American and Mexico market.

oem tsx

robots and jets wacky engineering? i already seen lot of robots doing work in japan that's normally done here by immigrants. Unlike the us, jp doesnt want a flood of foreigners coming in for work because they create more trouble ie mrdeeno. so instead they're going to mass produce humanoid robots to replace their honda lawnmowers with honda lawnrobots lol.

also the 1st jet honda has ever made already boasts the best performance, fuel economy, and cabinet space in its class. these guys just make the world more efficient and better. i dont understand why regular people dont understand this but always complain things like, no v8? no rwd? those people should be replaced with robots right now

and honda didn't see gas prices rising? fawk that, everywhere else in the world saw it coming because they've already been paying $5/gallon for so many years. right now, $3/gallon is still pretty cheap. us had years of cheap oil because of alaska, war in the middle east, etc.

oem tsx

i meant for the us market

vishnus11

The usuals (gilbo, deeno, ... ) chime in ...

What Deeno criticizes (at least partially), is what I find most endearing about Honda - their focus on fuel efficiency and minimizing the impact of its cars on the environment prevails regardless of whether those two issues are in public focus. Sure, now everyone thinks twice about fuel economy before purchasing a vehicle, and thus companies like GM have shifted their focus to this matter. However, Honda has ALWAYS focused on fuel efficiency and low emissions, regardless of times, and no other car company is committed to the environment like they are.

I won't even try to disagree about whether Honda has been late to the market - the Pilot came out in 2003 and the Oddy in 1995, and the Ridgeline in 05 but like all other Honda products, when they do come out, its pretty much a given that it WILL be the best product out there. For example, reading last month's C&D a nd Motortrend articles on subcompacts, it didn't surprise me one bit that the Honda Fit was ranked first against its competitors. More often that not (IMO) the Honda is the better built, better engineered car: the Civic shames all competitors save the Mazda 3 which runs a close second, the S2000 wiped the floor with all its competitors when it came out and can still shame much more expensive vehicles even today, the Ridgeline has revolutionized the pickup truck market, the Pilot was one of the best SUV's you could buy in 03 and still is, the Ody is constantly ranked as the best minivan out there, the Fit is the better subcompact......

The article doesn't address safety, but this is just one more area in which Honda blows away many of its competitors. The ACE body structure in the RL, Civic and RDX (and all future products) is the first example I've seen of a company being concerned not only about the safety of the occupants in its vehicle but also about the occupants in other vehicles involoved in a collision. During development of the S2000, Honda CHOSE to conduct its own in house rollover testing and rear impact testing despite the fact that both were not mandatry at the time.

In spite of all this though, Honda has had its f ups - I mean what were they THINKING with the rebadged Rodeo ala Passport! Nonetheless, every company has its bad moments, but overall Honda is a company that excels at what it does, and ESPECIALLY in todays world where the focus is shifting towards fuel economy and alternative ways to power vehicles, Honda is undoubtedly at the fore front.

F23A4

...and Honda was late in equipping their bread n' butter sedan (Accord) with a V6.

vishnus11

Exactly - when I read some info on the new "Hondajet" a couple weeks ago on the S2ki forums, it didn't surpise me one bit that Honda had once again reinvented the wheel, and come to the market with something more efficient and better performing than what the established players in the market had out. I just chuckled and "Honda does it again"

CVCC, VTEC, SH-AWD, ACE ... these guys are innovators who refuse to take a conventiial apprroach to things, and who refuse to accept compromise.

chiawei

VTEC is not really new concept. Honda was not the 1st company to have variable valve timing with lift control. Honda was the 1st to use electronic to achieve this.

SH-AWD- it's pretty much a marketing term that honda established to differentiate its AWD. Again, not orginial idea, but a good marketing terms.

ACE- again another honda marketing term for their structure design. Much like what Toyota GOA slogan was.

Honda like all other japanese manufacturer is not really an innovator, but they took the concept and design and take it a step further.

However, I think honda's approach has hurt them. Yes they are lucky that gasoline price is driving people to smaller and efficient car. But this is result of luck rather than careful planning.

No V8 and RWD has made honda a none player at high end of market. Do you think honda wouldn't want a piece of pie that BMW/meredes have?

I think Toyota is doing a better job than Honda.

mrdeeno

ah shit, he's back.

what does mexico have to do with anything?

oem tsx

honda should replace you with an asimo jkjkjk loloololololololl

mrdeeno

my beef with this article is it points out the stupidly obvious...

the car market changes. Yesterday it was trucks. Today it is fuel efficiency. tomorrow it may be performance. the day after may be trucks again. In the end, the most flexible automaker can keep up with the changes in the market, rather than sit and WAIT until the market cycles back to their favor.

Through the SUV cycle, truck cycle, minivan cycle, V8 cycle, HP cycle, Honda sat and waited. Now it is the fuel efficiency cycle...even a blind squirrel gets a nut sometimes.

BTW, i love how oemtsxparts chimes in with dumbass comments that have nothing to do with anything.

mrdeeno

and i rest my case...

oem tsx

sry, im not racists or anything but my neighborhood has immigrant workers that come in every week to mow the lawns and clean our houses. i just thought it would really funny if i a bunch of honda asimos came to clean my house and mow my lawn.

SpeedyV6

If my memory serves me correctly, Honda has never been as big as Toyota and thus has never had the resources it needs to effectively compete in every vehicle segment. Pursuing a focused strategy has allowed Honda to excel at the markets it has chosen to compete in.

corey415

Honda and Toyota have totally different mission statements and ideologies.

Honda will never be like Toyota, and that's something that I actually appreciate.

chiawei

I seriously doubt this comment. I don't think anyone is asking Honda to compete in all segment. But they could do a better job in their strategy.

I don't think everyone here wants honda to go after full-size truck segement. Or segment that honda currently does not compete in.

But V8 and RWD is a segment that honda plays with its RL and Acura division.

If honda has no intention of being a player in luxury brand, then it should close down Acura division and sell everything under honda brand. It would be more cost effective for them and more focused as well.

As far as resources goes. Honda does have resources for building a V8 and a RWD chassis. It is already developing the V10 for the NSX. What is the point of developing an NSX? Yes, it will be a icon car. But what does it do to improve's acura's position in eyes of BMW/Mercedes owners? If resources are really scarce, shouldn't honda has better use of resources for a new NSX on a V8 based RWD sedan. Which probably can spun out a V8/V6 full-szie SUV, a truck... and host of other possibility?

mrdeeno

again, immigrant workers have to do with this discussion how?

Fibonacci

I've owned six Honda vehicles and have been immensely pleased with all of them. The thing that's always attracted me to them is their philosophy of more with less.

Hey, I love torque and hp as much as the next guy. But when it comes to making car purchasing decisions, I always come back to safety, reliability and value.

Having said that, still hope they bring an adequate replacement to the NSX with the same philosopy as the original. Otherwise, will be very pissed off since I've been saving diligently to own the next one.

biker

And Honda choosing not to chase every cycle is a bad thing? They're usually late cause they look at the market and judge whether the cycle will be long enough for them to make money. And when they do come to market, it's usually with something pretty good. They choose not to go RWD and V8 cause they see Lexus and Infiniti with little market share in the big scheme of things (after many, many years of investments).

The one place they probably won't wait is diesel drivetrains - they saw the light in Europe (late as usual) with the 2.2 iCDTi and they'll spread that to many other markets. While VW has had a monoply on that market in the US for years, I have a feeling Honda will be putting out diesels in the US in a big way. MY08 could be the year US market for diesels opens in a big way and Honda doesn't want to miss that boat.
BTW, the Shell station near my office has "premium diesel" for sale. Has Shell always called it that or has ULSD finally made it to the retailers?

mrdeeno

no, it's not a bad thing at all. being focused on fuel efficiency and the environment is a good thing, and honda being focused on it and the market turning to fuel efficient cars is good for them.

but i fail to see the same significance that the article implies...that Honda predicted the market for this.

An analogous situation...a guy is a snowblower and snowshovel salesman...ONLY snowblowers and snow shovels. Most of the year, he gets very little business, but he maintains true to his snowblowers and snow shovels and refuses to sell lawnmowers or weedwackers, or even regular shovels. People criticize him for this, but he is proud of his "tradition".

Then come December, and people start wanting to buy snowblowers. Then a once-in-a-decade snowstorm comes, and he is reaching record sales of snowblowers.

Should he get an article touting his achievements in predicting the market? Should they say, "but this has been a case of good planning rather than good luck"?

it's an extreme example, but basically the same thing...Honda always focused on fuel efficiency, no matter what the "weather". Now the "weather" is turning in Honda's favor...but can you actually call this a "prediction" like the article implies?

chiawei

You are missing the point.

1st. The new M and GS has done okay in terms of market share. Lexus did suscessfully pulled down mercedes E-class sales from top to 2nd. In fact, mercedes used to dominate the E-class market. But with introduction of GS since 1998, the E-class share has come down.

2nd. Building a V8 and RWD will provide Acura with legit luxury brand image. Lexus used its V8 and RWD to solidify its brand image. Where is acura?

Acura came to the market 1st with upscale division. But what has honda done with it. Nothing.

Infamous425

i've seen some of oemtsx's posts and it seems like he pulls them out of his ass. seriously, he has nothing to add but stupidity

stangg172004

"the world slows down to Honda" :ducks:

F23A4

I will just add that even without having a bonafide 7-series/S-Class/LS competitor, Acura would go a LONG way towards establishing firm footing in this niche if it had a 325hp+ V8 powered Legend to compete with the likes of the GS430, E5550, 550i and M45. (The could have even gone with IMA and VCM features to increase power and fuel economy.)

Honda's problem definitely is not the goods (i.e.: engineering, technology, experience, etc,..) rather it is the execution.

Sidenote: If Honda would have played this right, they could have debuted a V8 RL that could have trumped the M45 and GS430.....particularly as both are new premium sedans with relatively "old" motors.

mrdeeno

i was led to believe this also and was hoping for this to occur prior to the RL debuting.

But after its introduction, even before anyone knew what the M and GS would really be like, I was disappointed.

It's not that they can't do it...it's because they choose not to.

biker

As I said in the grand scheme of things (world wide sales, not just the US) sedan sales from Infiniti and Lexus are miniscule compared to the Germans. Even in the US, only the LS has made any kind of headway - that's after 20 years of trying. Everytime someone predicts that this car or that car will dethrone the 3 series in the entry level or the 5series/E class in the mid sized class they are proven wrong. Lexus is getting closer, but after 20 years of trying they should be.

When great cars like the Phateon don't make it why should Honda take any chances? Deeno makes a good point that the article implies that Honda predicted this and clearly that's not the case - it does say that Honda's long time commitment to fuel efficiency is very useful at this time in the US.