Honda Hits Slump

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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.

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.

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

[GM-10]

As boring as their cars are, I was wondering when they would atleast show some slowed sales. I friend of mine is an engineer for Honda, has told me time and time again the company has become extremely arrogant and conservative.

[tosil]

So, perception for american vehicles is that of poor quality. When I see a quote in this artical stating otherwise, now we can see how biased the media can really be.

Example>>>[quote]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.[end quote]

As for people walking away because Honda does not offer incentives, well this could only hurt GM's attempts of getting rid of incentives. It looks like it is expected of every manufacturers to offer them now. Man, this has really turned into a soup opera.

[Cassie]

maybe if they didn't get Rubbermaid to design the exteriors.......

[uujjj]

Honda today is where GM was 20 years ago. They've grown full of themselves, and their products and dealer attitudes reflect that. 5 or 10 years ago, Hondas were indeed better, more reliable and more fun to drive, than their competitors. Today, that advantage is gone, their products are underwhelming and overpriced, and consumers are just starting to notice.

Mazda, Toyota, and even Ford offer small cars that are simply better than Honda's current, decontented Civic. Honda cannot charge a price premium when it has the 4th best car in the segment.

[dindak]

I like Hondas in general a lot more than I like Toyotas. Why Toyota does as well as it does with the dull cars it has is even more of a mystery to me.

[stewacide]

Originally Posted by dindak

I like Hondas in general a lot more than I like Toyotas. Why Toyota does as well as it does with the dull cars it has is even more of a mystery to me.

Agreed, but both are painfully boring next to what Mazda and Nissan have been doing the past few years.

[Redcoat]

The Civic is an old car...it really is their Cavalier. Lucky for them they are revamping it - hopefully this time they will see sense and sell their hugely successful Civic Type-R over the USA.

hell, the new Civic standard editions havent even been that popular in the UK vs the Focus and Golf. Half of UK Civic sales are Type-Rs! They cant make enough of those things and its 4 years old...

I think Honda's fortunes will improve if they continually refresh the Accord (isnt a new version from Japan coming out for '06 in America) and bring out the new Civic.

I am very interested to see what Hondas first year sales will be like for the Ridgeline.

[stewacide]

The Civic is old but the Accord is still pretty fresh. That'd be more worrying to me if I was at Honda...

[TiburonJT]

Originally Posted by Redcoat

I think Honda's fortunes will improve if they continually refresh the Accord (isnt a new version from Japan coming out for '06 in America) and bring out the new Civic.

"A freshened-up version of the Accord also will be available by the end of the year, sooner than originally planned."

[member12]

It seems like the current Civic has been on the market forever....

[hudson32]

Originally Posted by uujjj

Honda today is where GM was 20 years ago. They've grown full of themselves, and their products and dealer attitudes reflect that. 5 or 10 years ago, Hondas were indeed better, more reliable and more fun to drive, than their competitors. Today, that advantage is gone, their products are underwhelming and overpriced, and consumers are just starting to notice.

Mazda, Toyota, and even Ford offer small cars that are simply better than Honda's current, decontented Civic. Honda cannot charge a price premium when it has the 4th best car in the segment.

I don't think Honda is full of themselves when the Accord routinely makes the 10 best list on Car and Driver and many publications praise the car. I think that the Civic is old, and the Honda Accord has a few people who would prefer a different rear end to the sedan and styling. The same could be said of the Camry from Toyota, although it sells briskly. I think, Honda is not big on incentives. When GM and the domestics ran up this incentive battle, Toyota upped the ante to a certain extent, not to the level where GM is offering, but you can get 1000-3000 dollars off 4Runners, Tundras, and Sequoias. Like on a Camry you can get 500-1000 off at most dealerships, and some of them give you several thousand off. The Accords I've seen the dealers are very reluctant to discount. Unlike Toyota, Honda has been slow to join the incentive war. If there is a main reason why Honda's sales are slow, this is one of them. Sure, the merits of Honda's cars are subjective, but most people cross shop between brands and look for a great deal.

But Honda is in no way in a situation that GM is in. I wish that GM didn't start this incentive war. While they might've had somewhat fewer sales as a result of it, it would've helped GM's bottom line. And new cars like the G6, LaCrosse and Cobalt wouldn't need deep incentives to push through. What GM did, they ran amuck with incentives, thus creating a customer expectation of deep rebates and cash back.

[atomicshark]

Originally Posted by member12

It seems like the current Civic has been on the market forever....

It seems that way because it was so bland since it was new for 2001.

[Dirk Wiggler]

Remember the little Yugos sold here way back when? They had more style than Hondas snoozers. Toyota, you're next (hopefully).

[Slack]

I think the problem is that there are so many on the road today. If there are 1.5 million Civics on the road, it doesn't matter if you sold them over a 5 year or a 5 month period, people will get tired of them. Especially since there are only 3 variants: boring hatchback, more boring coupe, and even more boring sedan.