TSX69

Honda's Moment Arrives

By Warren Brown
Sunday, August 24, 2008; Page G02
NEW YORK

Honda could have been a contender. But it settled for being a winner instead.

The Japanese automobile manufacturer historically has ranked near the middle of the world's top 10 car companies in annual sales, content to earn a living selling mostly small cars with small engines that run nicely on relatively small amounts of gasoline.

That strategy once spawned detractors -- automotive journalists and some industry analysts who urged Honda to join the big league, to start rolling out big cars with big engines, to serve up something like a hot coupe with a banging V-8.

There were rumors that Honda would take the bait. "Those rumors have been around for 20 years," said Dan Bonawitz, Honda's U.S. vice president for corporate planning, speaking to journalists here.

Honda nibbled, offering up the car-based Ridgeline pickup, a bevy of mid-size sport-utility vehicles, and several impressive Acura and Honda sedans with V-6 engines. But Honda mostly remained true to its small-engine legacy, resisting the pressure to produce something with a V-8 and refusing to join Toyota and Nissan in taking on Detroit in the battle for big-truck supremacy.

"We chose to position ourselves for sustainable success," Bonawitz said.

Bonawitz has been saying that kind of thing for several years. But many of us in the media dismissed it as the convenient excuse of a company that didn't know how to make a competitive V-8.

"You could be a contender," we told Honda. "You could play with the majors. Look, even Hyundai is coming out with a V-8 in its Genesis luxury car. Are you guys going to let the Koreans beat you?"

Bonawitz and his people didn't listen. They just kept cranking out cars and pseudo-trucks -- the Ridgeline isn't a real truck -- with four-cylinder and six-cylinder engines. As a result, Honda is now in a league of its own, experiencing steady increases in vehicle sales in a market where most of its rivals are faltering.

Look at the devastation of the U.S. automotive landscape. Toyota is down. Nissan is down. General Motors and Ford are way down. Chrysler is on life support, awaiting rescue from potential partners who can supply it with the cars, especially small cars, it desperately needs to survive.

Honda, meanwhile, is expanding production of its hot-selling Civic compact cars in the United States. It is trying to cope with soaring consumer demand -- up nearly 72 percent in 2008 over 2007 -- for its Fit subcompact, which has been smartly redesigned for 2009.

Honda is planning annual U.S. sales of 85,000 Fits, which is so globally popular that the company is assembling it at plants in Japan, Brazil, Thailand and Indonesia.

"Our business strategy is more like that of the tortoise than it is the hare," Bonawitz said. "We might not be the first to come out with the biggest engine. But we concentrate on what our consumers want -- quality, efficiency, innovation. That doesn't always make a big splash. But it helps us to survive in challenging times like these."

That does not mean Honda will never produce a V-8 for the U.S. market. The company certainly knows how to produce powerful engines and fast cars, as evidenced by the success of Honda-engineered products in a variety of racing venues.

But, unlike its Detroit corporate brethren, Honda never really put much stock in the notion of winning at the track on Sunday and selling in the showroom on Monday. At Honda, a car for the track is one thing. A car for the practical demands of daily life is quite another. Put another way, the company has long understood that getting something right on the track does not ensure getting it right in the marketplace.

A Honda V-8?

Bonawitz laughed.

"These are very challenging times for our industry," he said. "We are witnessing what is likely to be a watershed moment for the American automobile industry" -- a moment when smart power, getting the most out of an engine using the least amount of fuel, trumps horsepower, Bonawitz said.

"At Honda," he added, "we've always been geared toward this moment."

dom

When the shock of high gas prices wears off, people will be back to their old SUV/truck buying habits IMO.

The shock is already wearing off. When was the last time you heard someone bitch about gas prices? Or saw a AZ thread bitching about gas prices?

Toyota sales may be down overall, but their car lineup still out sells Honda.

mltk53

ill believe it when i see it..

Sly Raskal

iTrader: (1)

Many American's will go right back to where they were before gas shot up to nearly $5/gal. They will have learned nothing. I myself put up with it as well up until the 2nd half of last year, but I didn't want to deal with it anymore and luckily found other modes of transportation before gas prices shot up even more. I said it in a previous post, for many American's, ignorance is bliss.

rondog

iTrader: (1)

I love how Honda has a philosophy ands sticks with it. But honestly, I don't think they had this grand scheme to surpass all the other auto companies when gas prices rose suddenly with their smaller more efficient engines. Its like they pulled a Homer.

phile

They just happened to be at the right place at the right time. It's happened before for Honda with the Civic.

I like Honda but I think Warren is stretching it a little here.

JCharged

iTrader: (5)

Althought that V8 would be something to see.

dom

They should be credited for sticking to their plan and company philosophy. But I doubt they foresaw this coming. If they did, they'd of had other small cars and hybrids ready to go already.

Mokos23

I agree with some of the points here

charliemike

Hahahahaha!

"At Honda, we've always been geared towards this moment"

OR

"We just couldn't get our act together to compete properly and now we've lucked into artificially high oil prices"

shmork53

I'm curious if Honda is still going to produce the V10 for the NSX and possibly the RL. I do agree that Honda wasn't in the right place at the right time, there is no way they could have "planned for it." If Honda can make an efficient v6 whats going to stop them from making an efficient v8? It can be done, the GM small block in the Avalanche gets 21mpg on the highway. Honda should be able to make a v8 that gets more then that, they just don't want to try.

charliemike

There's not reason they can't build a V8 with cylinder deactivation. Runs on 4 until you need it. Very Honda-like.

Moog-Type-S

Bingo! You hit the nail on the head.
It's a "cop-out" for why Honda couldn't compete with the big boys.

JeffS

The article seems to give Bonawitz a lot of credit for decisions that were made in Japan and probably out of his control.

Costco

Good for them. But as long as they insist on pumping out FWD 4-cyl economobiles, I'll pass. I fully believe that they can make a V8, they've built V10 F1 race engines for YEARS.

http://www.youtube.com/watch?v=014-Jxskqm4

Why don't they build a RWD V8? I have no idea. I guess they're just content with being mundane. The article in general seems to give off the notion that someone was given instructions to write an article that makes Honda look good, and to leave out any notions that they've made any mistakes.

This makes me laugh though:

So a Type-R anything with less sound deadening, no A/C and no radio is made for daily life? I like the entire Type-R lineup but that part of the article was just ridiculous. Apparently a V8 isn't ideal for daily driving at all, but Type-Rs are okay.

LuvMyTSX

My parents just contributed to Honda's small-car success. They pick up their new Civic on Friday.

TMQ

I don't think you guys are getting it. This is Honda, after all. This is not Acura. I always like Honda's determination on relatively small and efficient FWD vehicles. They've been on the same consistent path for more than 30 years. It's a car for the masses and for most markets, whether busy cities in Asia or crowded suburban highways in America, Honda is very suitable. It's even unfortunate that the Accord has grown so big. It's unfortunate that it took Honda so long to figure out a formula for the hybrids.

On the other hand, it's a totally different story for Acura. Acura's purpose is to serve a different market, which desires performance and luxury. For that, Acura needs to offer RWD cars and choices you can customize. V8 isn't as important as which wheels drive the car. Just check out the NSX.

The fact that even BMW advertises the fuel efficiency of its vehicles goes to show you that Honda is on the right path.

Black Tire

No...gas prices may level off, but they will continue to rise. Honda will be the leaders in the MPG race. For some reason US gas prices have been declining, but up here they have been increasing.

dom

I agree that they will increase. But, once the shock of it wears off people will adjust accordingly.

I can't remember the last time I've heard complaining about gas prices at work, through friends or even on the news. And gas is $4.75 a gallon up here and has been for some time. Those first few $90 fill ups in the Odyssey hurt, but now it doesn't phase me.

I'm not suggesting truck and SUV sales will return to previous levels but not everyone will be buying a Civic or a Corolla either.

Trackruner228

iTrader: (1)

Honda doesnt really need a V8, its Acura that does. Honda is doing just fine where they are now. Its Acura they should be focusing on.

afici0nad0

i'm not as hell-bent on a honda/acura v8 as others may be, but man, can't they give us a rwd platform with an i4 or v6, other than in a roadster form?

TL2498

Very well said, and Oh so true. They have maintained this same philosophy since the company's inception. They have always seen practicality and fuel economy as the #1 priorities. Then, in the mid eighties they began to incorporate "fun" into that mix. If you think for a second that they (and Toyota, for the most part) did not see the higher fuel prices coming, you are insane. How could they NOT see it coming? Fuel prices have been trending this way since the 1970's. Honda has never been concerned with those "swing buyers" who let fuel prices affect the type of vehicle they drive. The company has it's core of dedicated repeat buyers who saw this coming as well (not to mention the reliability factor) and spikes in prices only help to enlarge that core.

And yes, Acura is a completely different story.

Infamous425

gas prices dont bother me too much. and theres no honda/acura i'd want to buy right now except the new TSX has grown on me but i wont buy it unless it has a v6 or a more VW-like turbo 4 (dont like the RDX turbo4)

Edward'TLS

The lack of V8 engines doesn't prevent the Acura sales from faltering either. All Acura lines, except the smallest and cheapest TSX, are suffering from sliding sales.

The only major sales gain is in the Honda division, with the smallish Fit and Civic, and a little contribution by the Accord.

Both Honda and Acura trucks are not doing well, just like the rest of the auto industry. No exception.

AZN.M3NACE

I agree.

AZN.M3NACE

in my family, we all have 07` Accord EX-L, 2 07` CR-V EX, and 07`Civic EX lastly, my 03Acura TL =)

TSX69

10 Questions about Honda

Honda's Dick Colliver talks about cars, the local work force, the company's future
Wednesday, August 27, 2008 3:01 AM
By Tracy Turner
THE COLUMBUS DISPATCH

Ohio "should feel comfortable with Honda," says Richard E. Colliver, executive vice president of Honda's U.S. automobile sales. "We've made major investments here and we're here to stay."

This week, Honda of America rolled out its highly anticipated 2009 Acura TL sport sedan, an entry-level luxury vehicle that got a makeover.

Richard E. Colliver, the automaker's No. 2 man in North America, was in central Ohio this week for the introduction of the new-look vehicle.

His presence demonstrated Honda's view that central Ohio is an important part of the company's future.

Colliver, whose formal title is executive vice president of automobile sales, had these thoughts on Honda and the company's commitment to Ohio.

tturner@dispatch.com

1 Honda's sales have been strong despite the poor economy. Has the company felt the downturn?

We're not immune to what's going on in the industry. We've had to adjust production because of the light truck sales where we've seen declines but not as bad as some of the others in the industry.

2 How has Honda adapted?

We anticipated that we were going to be in a higher-gas-price, lower-fuel-economy market. And our business plan we put together last November stressed that we needed to go back to the basics of the strength of our brand, which was the fuel economy, the cost of ownership and value of our product. Because of the availability of products like the Civic, the Fit and the Accord, we were perfectly positioned to address the market as the oil prices started ramping up.

3 Did Honda anticipate how devastating the credit crunch would be to the economy and result in banks tightening access to loans, including auto loans?

No, we didn't see it coming to be as bad as it is. But having been in the finance business, and seeing what was being done on real-estate loans and even some auto loans, I knew that the odds of that imploding was coming. When I was in Japan at headquarters in October, all the high-ranking finance people wanted to talk about was the availability of financing and how the subprime market could potentially impact our business.

4 Ohio has seen a rapid drop in automotive jobs, with Honda being one of the few employers that held steady. What's the outlook for Honda?

Our employment base is going to be stable. Because of the Indiana plant, we've had to make some adjustments to (expand) some our facilities, which has required us to add a few people. Our suppliers have had to add people, so overall, we estimate that's resulted in over a billion-dollar impact to Ohio. Ohio's really the center of the heartbeat of Honda manufacturing in North America.

5 Are there any new models or expansion plans that could bring more jobs and increase the headcount in central Ohio?

We're not announcing any new models or changes right now in Ohio. We've shifted production to increase production on Civics and more fuel-efficient vehicles, but right now, we don't have any plans to bring any additional models.

6 Honda has plans to introduce a hybrid-only model that will be built in Japan. What are the prospects for Honda eventually building hybrids in the U.S. and how might Ohio figure into that process?

You can never say never, but right now, this is a brand new global model that's going to be distributed all over the world, with the planned production around 200,000. We have a saying at Honda that with a new car, there is a mother ship, which basically means where it's designed and developed and originally built. And that mother ship is in Japan for this car.

7 What is Acura's niche in the luxury market and how do you respond to critics who say the brand doesn't have a clear enough identity?

We've had some issues over the past about getting the resources and the right product for the market at the time, but I'll say this: The future for Acura is very clear for us and where we want to take it. We know what the next five- to six-year product plan is. As we redefine what the next generation of these models are going to be, it's going to take us into the top-tier luxury segment.

8 Honda never got into the larger SUV V-8 engine market. Are you now glad the company made that decision, considering the market declines for those vehicles?

We feel like maybe we were smart and lucky. We felt a lot of pressure when the large truck got to more than 50 percent of the market, with a large percentage of those with V-8 engines. But our plan was to stay with our core direction of where we wanted to grow, and building fuel-efficient cars that were reliable. Now they are saying the market is coming back to us.

9 Any more green cars coming down the line?

Our global strategy for the hybrid is to grow that segment significantly. We're anticipating 500,000 units a year . In addition to the new global hybrid that we will introduce next spring, we'll also announce that we're going to bring in a model based on the CR-V.

10 Any parting thoughts?

The people in Ohio should feel comfortable with Honda. We've made major investments here and we're here to stay. We're going to continue to grow our business and we have a huge contingency of research and development here that are involved in developing new products for us. The work ethic of the people in the Midwest was a strong reason why we built plants here. We're bullish on the future of Ohio.

TSX69

Unless I am reading it wrong, it sounds like they are going to be making a cute ute hybrid. Does not sound like a CR-V hybrid but something along those lines.

Assuming that all of this isn't just talk, Honda/Acura is making a lot moves lately. Seems like something finally woke the sleeping giant. Next several years are going to be pretty interesting, especially compared to the last couple.

dom

Honesty is a good thing.

CarbonGray Earl

Honda isn't so much lucky as it is light on its feet compared to other manufacturers.

Mokos23

wish the interviewer asked Dick, isn't the 09 TL ugly? also, who came up with that new acura grille?

03aspec

gas prices are decreasing?

mrmako

Do you know your avatar means "elderly driver" here in Japan? Ogisan (grandpa) behind the wheel?

TSX69

Honda's Commitment to Small Cars is Paying Off
Company never wavered from its green philosophy

By Bill Vlasic
NEW YORK TIMES NEWS SERVICE
September 2, 2008

TORRANCE – During the glory days of big pickups and sport utility vehicles, one automaker steadfastly refused to join the party.

Despite the huge profits that its competitors were minting by making larger vehicles, Honda Motor never veered from its mission of building fuel-efficient, environmentally friendly cars like its Accord sedan.

“I remember being at the Tokyo Motor Show in the mid-1990s and talking about the environment,” said Ben Knight, head of engineering at Honda's North American division. “The reaction was 'there's no return on that.' ”

But in today's fuel-conscious automotive market, Honda is reaping the rewards for its commitment.

No major automaker in America is doing better than Honda, whose sales are up 3 percent for the first seven months of this year in a market that has fallen 11 percent. By comparison, General Motors is down nearly 18 percent, Ford Motor has dropped 14 percent, and Toyota has slid 7 percent.

While competitors are scrambling to shift their product lineups to build more small vehicles and slash their bloated inventories of trucks, Honda can barely keep up with demand, particularly in the subcompact category.

Sales of its tiny Fit have soared 79 percent so far this year, and interest in the vehicle is so strong that Honda accelerated the introduction of the 2009 model, which went on on sale last week.

The Fit's four-cylinder engine gets 34 mpg in highway driving, but the quirky little hatchback does not scrimp on creature comforts. The base model – which sells for $15,200, including delivery charges – has a satellite-linked navigation system and safety features like side-curtain airbags.

Honda's focus on fuel efficiency is paying off on the bottom line as well. The Japanese automaker reported a record profit of $1.68 billion during its fiscal first quarter that ended in June, an 8.1 percent jump from the previous year.

By comparison, GM and Ford have lost billions of dollars this year as the market has moved away from the big vehicles that once generated the bulk of their profits. Detroit is moving radically to downsize its vehicle lineups and, in Ford's case, to convert assembly plants from making trucks to small cars.

Even Honda's larger Japanese rival, Toyota, is hustling to adjust to the rapidly changing U.S. market.

Toyota dedicated its latest American assembly plant in Texas to building full-size pickups. Honda's newest factory, in southern Indiana, is set to begin production of Civic compact cars this fall.

Honda's focus on fuel efficiency and the environmental impact of its vehicles dates back to the Clean Air legislation of the 1960s and 1970s. Knight, the head of Honda engineering in North America, recalled how Honda adopted an internal motto – “Blue skies for our children” – as a guideline for future vehicle development. “The discussions inside the company have always been consistent,” said Knight, who joined the company in 1976.

Honda has posted the highest corporate average fuel economy of any automaker for its overall fleet of vehicles over the last 15 years, according to federal statistics.

The fuel economy of its cars is comparable to Toyota, but Honda has never aspired to build a full line of trucks and SUVs.

Its lineup includes the midsize Ridgeline pickup, as well as lighter-weight, car-based crossover vehicles like the CR-V, Element and Pilot.

“Honda is a philosophy-driven company,” said Tetsuo Iwamura, president of Honda North America. “Even when the large SUVs and trucks were big sellers, they did not fit with our philosophy.”

Honda's dealers pressed the company in recent years to build a full-size pickup and introduce a V-8 engine, said Dan Bonawitz, head of corporate planning in the United States.

“We kept asking ourselves what value Honda would bring to the customer in that category,” he said. “There was just no benefit for us to get in it.”

Sales of Honda's crossovers, minivans and pickups have dropped this year along with the overall market. But the surge in sales of its cars has more than made up for the shortfall.

Unlike many other automakers, Honda has been able to capitalize on the switch in demand to cars because of the flexibility of its assembly plants.

At Honda's plant in East Liberty, Ohio, for example, the assembly line can switch almost seamlessly from Civics to CR-Vs.

When the new plant goes into production in Indiana, Honda's North American production capacity will increase to 1.4 million vehicles a year to meet the growing demand for its small cars.

“We had a very good May and June with sales of the Civic, but July and August have been terrible because of a shortage of stock,” Iwamura said. “But by October, the supply situation will be improved a great deal.”

Other automakers are also increasing production of their small cars, but Honda is cashing in on its reputation for the reliability, fuel efficiency and handling of its vehicles.

“Honda's cars seem to have more personality than Toyota's,” said Aaron Bragman, an analyst with the research firm Global Insight in Troy, Mich. “Their cars are enjoyable to drive, and not just appliances.”

Meghan Bohnert of Festus, Mo., recently traded in her Toyota Corolla for a Fit because it “stood out” from other cars in the subcompact segment.

“People I know think the car is cute, and it surprises them with its pep,” said Bohnert, a 24-year-old analyst for AT&T. “People are also surprised at the amount of interior space.”

Even with the success of its smallest cars, Honda executives concede that the company has some catching up to do with Toyota in hybrid vehicles.

While Honda offers a hybrid version of the Civic, Toyota's Prius model is the runaway leader in the category.

But Honda recently announced plans to introduce a five-door, hybrid-only model in North America next year to compete with the Prius. The company is expected to price the vehicle lower than the Prius to attract younger buyers.

Honda is also planning a two-door, sporty hybrid and a hybrid version of the Fit.

At Honda's headquarters in Torrance, the vehicle that draws the most attention these days is the company's hydrogen-powered, fuel-cell vehicle dubbed the FCX Clarity.

The company recently began a program to lease the fuel-cell car to a small number of consumers in California. Executives declined to predict when the car will be available for the mass market, but they said it represents the next step for a company committed to clean technology.

“We have a saying that we want to make Honda the company that society wants to exist,” Iwamura said.