The threat to Honda's mojo:Year of opportunity goes in reverse for brand
12-06-10, 06:59 AM
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The threat to Honda's mojo:Year of opportunity goes in reverse for brand
The threat to Honda's mojo
Year of opportunity goes in reverse for brand
Mark Rechtin
Automotive News -- December 6, 2010 - 12:01 am ET
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LOS ANGELES -- For Honda, 2010 was shaping up to be a year of tremendous opportunity.
With Toyota in the midst of the recall mess and two of the Detroit 3 climbing out of bankruptcy, Honda Division was in a unique position to increase sales and seize market share.
It didn't turn out that way.
Instead of gaining on its rivals, Honda's U.S. retail and overall share are down this year. Honda brand sales are up just 4 percent through November, in a market that's up 11 percent.
"Honda is not riding the wave" of the auto recovery, says Lincoln Merrihew, managing director of Compete Automotive, a market research firm.
Some of that has to do with timing. Two crucial products, the Civic and CR-V, are in the final year of their product cycle, and the Accord is 18 months from a redesign.
But other problems -- such as declining buyer consideration, an outdated inventory system and a sliding reputation among younger car shoppers -- suggest a brand that has lost some of its mojo.
Some missteps are easily reversible. For example, Honda held back production and inventory in February when the economy began to show signs of life, giving an opening to more aggressive manufacturers.
John Mendel, American Honda executive vice president, says a lull in Honda's product cadence arrived with the recession. Combine older products with Honda's aversion to discounting -- at a time when people were looking for deals -- and the division failed to keep pace with brands willing to dicker and sell volume to commercial fleets.
Share? Who cares?
The view at Honda? It's a short-term blip that doesn't matter.
At Honda, "no one talks about share," Mendel said in a recent interview. "Chasing share gets you into bad habits. We set a business plan to sell a certain number of cars. We don't set the plan based on an assumed share. We plan to grow 2 or 3 percent in volume in good times, and bad times. And there are times we'll give share back."
Honda was wary of cranking up production too soon, and it paid a price for that cautiousness.
"We had the capacity. We saw a blip in the truck market, but we wanted to make sure it was sustainable, so we were six months late," Mendel said.
But the problems go deeper than that.
Honda dealers are having trouble providing shoppers with the vehicles they want. Honda's inventory and allocation system was designed when Honda had far fewer nameplates and trim levels, and the model proliferation has quickly outstripped the system's ability to let dealers order the exact vehicles they want.
The outdated system is a key reason for the slippage in Honda's dealer satisfaction scores on National Automobile Dealers Association surveys.
"Inventory has been a problem," said Ron Theis of Honda of Corvallis, in Corvallis, Ore., who is chairman of the dealer advisory board. "We could sell more if we had them."
Honda also is losing cross-shop battles, according to Compete Automotive, which measures buyer consideration of brands.
During the summer, Hyundai -- whose sales are only half those of the Honda brand -- nearly eclipsed Honda in the percentage of consumers that shopped their respective brands, according to Compete. And the company says the number of shoppers entering the new-car market is growing faster than the number of shoppers interested in Honda.
"Ford and Hyundai shoppers are cross-shopping Honda less," says Merrihew. "Even Toyota shoppers are shopping Honda less."
Loyalty -- but . . .
On the plus side, the repurchase-loyalty rate among Honda owners has been growing, from 42 percent in 2001 to about 56 percent this year, according to R.L. Polk data. The industry average is about 44 percent.
That loyalty usually comes in handy when new product arrives. But Honda's recent record on new-product launches has been spotty.
"Typically you get a spike with your own customers when you have new-product launches, and Honda has been pretty quiet," said Polk analyst Lonnie Miller. "With sales performance and repeat selling, your owners get rejuvenated with new products." For all its recall troubles, Toyota is trouncing Honda in two cases this year where competing models were launched at about the same time.
In the battle of dueling hybrids launched last spring, the Prius is outselling the Insight 8 to 1.
Honda's U.S. execs planned to sell 60,000 to 80,000 Insights a year; through November, only 19,325 were sold. That's probably why Honda introduced a base model Insight last week with less content that is $4,610 cheaper than the base Prius.
The Accord Crosstour hasn't fared much better against the Toyota Venza, which has a base price of about $1,500 less. Through November, the Venza has outsold the Crosstour 43,325 to 25,927. Data from auto research firm TrueCar show that both Crosstour inventories, and the discount needed to sell them, are larger than those for the Venza.
Honda's sporty new CR-Z hybrid coupe has fallen short as well. The CR-Z was launched with much fanfare in July, but with a modest 15,000-unit annual sales target. Still, Honda sold just 4,373 units in its first five months, with 3,000 cars sitting in inventory as of Nov. 1.
On the plus side of the launch ledger, the recently redesigned Odyssey minivan introduced in September is off to a strong start.
Why have the launches been letdowns?
"Lowest-common-denominator styling," says Jesse Toprak, a TrueCar vice president.
He says consumer clinics and word of mouth show that an increasing number of shoppers feel Honda has lost its way.
"The growing Gen Y demographic is more discriminating with their taste," he said. "Honda has become a safe purchase and developed a boring-car image, especially in Los Angeles and Florida, where opinions are formed for the rest of the nation."
And while the Venza is marketed to 60-somethings, "the Crosstour isn't being marketed at all, and it's expensive as heck," says Tracey Schneiter, vice president of financial analysis and forecasting for consultancy IRN Inc. in Grand Rapids, Mich.
Schneiter says that the Crosstour, which tops out above $37,000, is an example that shows Honda doesn't understand the proper model mix and features for its targeted consumer.
Losing APEAL
Art Wright, a Honda and Hyundai dealer in Lehigh Valley, Pa., says marketing has never been Honda's strong suit. And with tougher competition from Hyundai and Ford, Wright says it is no longer just a matter of waiting for customers to show up for their next new Honda.
"We've always been a product-oriented company," he says. "But right now the market is value-oriented, and you have to have the right marketing to go along with it."
In 2007, Honda reported its 11th straight year of record sales. It also grabbed four awards out of 19 categories -- the most of any brand -- in J.D. Power's APEAL survey, which measures how gratifying a car is to own.
From being among the leaders of mass-market brands in 2007, Honda's APEAL scores have fallen to below-average each year since.
Honda executives and some dealers see a much brighter 2011. They expect an economic recovery to coincide with a new Civic and CR-V due in the next six months and a redesigned Accord for mid-2012.
Says Mendel: "When the latest survey was done, the majority of our volume was old-model product. We were still on our old Odyssey and Civic, an Accord just prior to model change, and no CR-Z. We're going to stand tall on APEAL next time around."
Mendel is focusing on the early success of the redesigned Odyssey minivan, instead of niche products like the Crosstour and CR-Z. Sales of the new minivan are up nearly 50 percent over last year's sales of the old model.
Honda appears to be catching up since it cranked up North American truck production in August. Recent sales of the Odyssey, Pilot and CR-V all have been stronger.
Honda also is getting heavier into the incentive game, with an all-time high level of consumer incentive spending, though still well below the industry average. In the fourth quarter, Honda also unveiled cash-per-car dealer incentives ranging from $500 to $2,500 on the Civic and Accord, aiming for a 16 percent volume boost.
The Civic hit the target in November, but Accord sales were up just 10 percent.
Inventory snarls
Dealers say they could hit sales targets if Honda would fix its inventory and allocation system. The system, called MOVE (for market-oriented vehicle environment) was rolled out in 2001. Honda has promised an update in 12 to 18 months.
Oregon dealer Theis, a 25-year Honda veteran, said increasingly complicated model proliferation has taxed the current MOVE system. It's about more than just days' supply on a dealer's lot going toward turn-and-earn; it determines what vehicles can be ordered at a particular time.
Large and small dealers agree that Honda's inventory, allocation and manufacturing systems are not properly aligned, requiring a combination of mathematics and luck to get the right cars in stock.
The new Odyssey is an example of what frustrates dealers. With pricey options such as rear-seat video, power tailgate and leather seats, the new van has many more trim levels and features. Dealers believe they are better judges of local tastes than are factory reps.
"Right now we can choose within certain build constraints each month, but that can still be reconfigured by the factory," said Theis. "Dealers say if they could get the cars they want, and get more local control, they could grow."
The new allocation system "will provide dealers with an intuitive, more localized and market-focused way of managing their inventories," said Dennis Manns, vice president of sales and logistics planning.
The current inventory system is one reason dealer satisfaction scores, as measured by NADA, have fallen. Mendel says he takes the NADA survey seriously, but still brushes off the complaints as being closely linked to dealer profits.
"The NADA score has correlated to dealer profits for time immemorial," he said. "Honda and Toyota have been at the top forever, so relatively speaking, if I were a Ford or Hyundai dealer, I would be ecstatic.
"But I know of no Honda dealer who would swap a Hyundai dealer for their store straight up."
Year of opportunity goes in reverse for brand
Mark Rechtin
Automotive News -- December 6, 2010 - 12:01 am ET
Print Email Reprints 12 comments
Recommend (3)
LOS ANGELES -- For Honda, 2010 was shaping up to be a year of tremendous opportunity.
With Toyota in the midst of the recall mess and two of the Detroit 3 climbing out of bankruptcy, Honda Division was in a unique position to increase sales and seize market share.
It didn't turn out that way.
Instead of gaining on its rivals, Honda's U.S. retail and overall share are down this year. Honda brand sales are up just 4 percent through November, in a market that's up 11 percent.
"Honda is not riding the wave" of the auto recovery, says Lincoln Merrihew, managing director of Compete Automotive, a market research firm.
Some of that has to do with timing. Two crucial products, the Civic and CR-V, are in the final year of their product cycle, and the Accord is 18 months from a redesign.
But other problems -- such as declining buyer consideration, an outdated inventory system and a sliding reputation among younger car shoppers -- suggest a brand that has lost some of its mojo.
Some missteps are easily reversible. For example, Honda held back production and inventory in February when the economy began to show signs of life, giving an opening to more aggressive manufacturers.
John Mendel, American Honda executive vice president, says a lull in Honda's product cadence arrived with the recession. Combine older products with Honda's aversion to discounting -- at a time when people were looking for deals -- and the division failed to keep pace with brands willing to dicker and sell volume to commercial fleets.
Share? Who cares?
The view at Honda? It's a short-term blip that doesn't matter.
At Honda, "no one talks about share," Mendel said in a recent interview. "Chasing share gets you into bad habits. We set a business plan to sell a certain number of cars. We don't set the plan based on an assumed share. We plan to grow 2 or 3 percent in volume in good times, and bad times. And there are times we'll give share back."
Honda was wary of cranking up production too soon, and it paid a price for that cautiousness.
"We had the capacity. We saw a blip in the truck market, but we wanted to make sure it was sustainable, so we were six months late," Mendel said.
But the problems go deeper than that.
Honda dealers are having trouble providing shoppers with the vehicles they want. Honda's inventory and allocation system was designed when Honda had far fewer nameplates and trim levels, and the model proliferation has quickly outstripped the system's ability to let dealers order the exact vehicles they want.
The outdated system is a key reason for the slippage in Honda's dealer satisfaction scores on National Automobile Dealers Association surveys.
"Inventory has been a problem," said Ron Theis of Honda of Corvallis, in Corvallis, Ore., who is chairman of the dealer advisory board. "We could sell more if we had them."
Honda also is losing cross-shop battles, according to Compete Automotive, which measures buyer consideration of brands.
During the summer, Hyundai -- whose sales are only half those of the Honda brand -- nearly eclipsed Honda in the percentage of consumers that shopped their respective brands, according to Compete. And the company says the number of shoppers entering the new-car market is growing faster than the number of shoppers interested in Honda.
"Ford and Hyundai shoppers are cross-shopping Honda less," says Merrihew. "Even Toyota shoppers are shopping Honda less."
Loyalty -- but . . .
On the plus side, the repurchase-loyalty rate among Honda owners has been growing, from 42 percent in 2001 to about 56 percent this year, according to R.L. Polk data. The industry average is about 44 percent.
That loyalty usually comes in handy when new product arrives. But Honda's recent record on new-product launches has been spotty.
"Typically you get a spike with your own customers when you have new-product launches, and Honda has been pretty quiet," said Polk analyst Lonnie Miller. "With sales performance and repeat selling, your owners get rejuvenated with new products." For all its recall troubles, Toyota is trouncing Honda in two cases this year where competing models were launched at about the same time.
In the battle of dueling hybrids launched last spring, the Prius is outselling the Insight 8 to 1.
Honda's U.S. execs planned to sell 60,000 to 80,000 Insights a year; through November, only 19,325 were sold. That's probably why Honda introduced a base model Insight last week with less content that is $4,610 cheaper than the base Prius.
The Accord Crosstour hasn't fared much better against the Toyota Venza, which has a base price of about $1,500 less. Through November, the Venza has outsold the Crosstour 43,325 to 25,927. Data from auto research firm TrueCar show that both Crosstour inventories, and the discount needed to sell them, are larger than those for the Venza.
Honda's sporty new CR-Z hybrid coupe has fallen short as well. The CR-Z was launched with much fanfare in July, but with a modest 15,000-unit annual sales target. Still, Honda sold just 4,373 units in its first five months, with 3,000 cars sitting in inventory as of Nov. 1.
On the plus side of the launch ledger, the recently redesigned Odyssey minivan introduced in September is off to a strong start.
Why have the launches been letdowns?
"Lowest-common-denominator styling," says Jesse Toprak, a TrueCar vice president.
He says consumer clinics and word of mouth show that an increasing number of shoppers feel Honda has lost its way.
"The growing Gen Y demographic is more discriminating with their taste," he said. "Honda has become a safe purchase and developed a boring-car image, especially in Los Angeles and Florida, where opinions are formed for the rest of the nation."
And while the Venza is marketed to 60-somethings, "the Crosstour isn't being marketed at all, and it's expensive as heck," says Tracey Schneiter, vice president of financial analysis and forecasting for consultancy IRN Inc. in Grand Rapids, Mich.
Schneiter says that the Crosstour, which tops out above $37,000, is an example that shows Honda doesn't understand the proper model mix and features for its targeted consumer.
Losing APEAL
Art Wright, a Honda and Hyundai dealer in Lehigh Valley, Pa., says marketing has never been Honda's strong suit. And with tougher competition from Hyundai and Ford, Wright says it is no longer just a matter of waiting for customers to show up for their next new Honda.
"We've always been a product-oriented company," he says. "But right now the market is value-oriented, and you have to have the right marketing to go along with it."
In 2007, Honda reported its 11th straight year of record sales. It also grabbed four awards out of 19 categories -- the most of any brand -- in J.D. Power's APEAL survey, which measures how gratifying a car is to own.
From being among the leaders of mass-market brands in 2007, Honda's APEAL scores have fallen to below-average each year since.
Honda executives and some dealers see a much brighter 2011. They expect an economic recovery to coincide with a new Civic and CR-V due in the next six months and a redesigned Accord for mid-2012.
Says Mendel: "When the latest survey was done, the majority of our volume was old-model product. We were still on our old Odyssey and Civic, an Accord just prior to model change, and no CR-Z. We're going to stand tall on APEAL next time around."
Mendel is focusing on the early success of the redesigned Odyssey minivan, instead of niche products like the Crosstour and CR-Z. Sales of the new minivan are up nearly 50 percent over last year's sales of the old model.
Honda appears to be catching up since it cranked up North American truck production in August. Recent sales of the Odyssey, Pilot and CR-V all have been stronger.
Honda also is getting heavier into the incentive game, with an all-time high level of consumer incentive spending, though still well below the industry average. In the fourth quarter, Honda also unveiled cash-per-car dealer incentives ranging from $500 to $2,500 on the Civic and Accord, aiming for a 16 percent volume boost.
The Civic hit the target in November, but Accord sales were up just 10 percent.
Inventory snarls
Dealers say they could hit sales targets if Honda would fix its inventory and allocation system. The system, called MOVE (for market-oriented vehicle environment) was rolled out in 2001. Honda has promised an update in 12 to 18 months.
Oregon dealer Theis, a 25-year Honda veteran, said increasingly complicated model proliferation has taxed the current MOVE system. It's about more than just days' supply on a dealer's lot going toward turn-and-earn; it determines what vehicles can be ordered at a particular time.
Large and small dealers agree that Honda's inventory, allocation and manufacturing systems are not properly aligned, requiring a combination of mathematics and luck to get the right cars in stock.
The new Odyssey is an example of what frustrates dealers. With pricey options such as rear-seat video, power tailgate and leather seats, the new van has many more trim levels and features. Dealers believe they are better judges of local tastes than are factory reps.
"Right now we can choose within certain build constraints each month, but that can still be reconfigured by the factory," said Theis. "Dealers say if they could get the cars they want, and get more local control, they could grow."
The new allocation system "will provide dealers with an intuitive, more localized and market-focused way of managing their inventories," said Dennis Manns, vice president of sales and logistics planning.
The current inventory system is one reason dealer satisfaction scores, as measured by NADA, have fallen. Mendel says he takes the NADA survey seriously, but still brushes off the complaints as being closely linked to dealer profits.
"The NADA score has correlated to dealer profits for time immemorial," he said. "Honda and Toyota have been at the top forever, so relatively speaking, if I were a Ford or Hyundai dealer, I would be ecstatic.
"But I know of no Honda dealer who would swap a Hyundai dealer for their store straight up."
12-06-10, 06:20 PM
#3
Lexus Fanatic
Interesting article, does hit on some of the problems in last few years. Yes loyalty by the less demanding buyers is still high, but conquest sales from other brands are on the decline.
12-06-10, 11:06 PM
#4
I think Honda's problem is that they are so stuck in the past. The 90's and early 2000's were certainly a great years for them, filled with many solid product offerings. Flashforward, and we have a company that is still sticking to their traditional roots. Nothing against their FWD cars, but they have been eclipsed by much more modern machines (Hyundai Sonata and Ford Fusion ringing any bells Honda?). To add to this, much of their line-up still use what seem to be archaic 5-Speed auto's (I understand keeping costs low) but they have a perfectly good 6-Speed that should have found it's way into more than what's offered now. The J-Series V6 has been around since 1996. And in an effort to capture customers, their styling and design departments went off the deep end. Trying to bring hip and cool, to their safe and reliable products. The result is weird fusion of lines and curves. I hate to say it, but the company that seems to try and carry on the tradition of good reliable transportation (if not boring cars now) really needs to go back to basics. I think it would do them good to stop thinking what their customers want, and rather ask them what they want. If Honda wants to turn around, I really think it comes down to revamping the entire line-up. Starting with new chassis, engines, transmissions, design, and safety innovations. Modernize tradition Honda!!! my $0.02
12-16-10, 10:30 AM
#5
Guest
Posts: n/a
Another stating the obvious article
http://today.msnbc.msn.com/id/406560...usiness-autos/
.
http://today.msnbc.msn.com/id/406560...usiness-autos/
Critics say Honda may be losing its edge
Response to new Civic key to whether automaker getting back on track
Image: Acura ZDX
Acura
The Acura ZDX embodies Honda’s woes. The quirky coupe/crossover blend has been much-maligned by the media and largely ignored by potential buyers. November sales totaled just 156.
Image: Paul A. Eisenstein, msnbc.com contributor
By Paul A. Eisenstein
msnbc.com contributor msnbc.com contributor
updated 12/15/2010 3:23:42 PM ET 2010-12-15T20:23:42
Honda is getting busy, going into the holidays, offering automotive journalists a sneak preview of its most important product launch of the coming year.
The rendering of the all-new, 2012 Civic reveals a sleekly aerodynamic coupe, one Honda hopes will catch the eye of buyers in an increasingly competitive compact car market. Critics say the Japanese automaker may be losing its edge, and so the ninth generation of the Civic is going to be critical to Honda’s future success.
Scheduled to make its first formal appearance at next month’s Detroit Auto Show, the Civic has long been — along with the bigger Accord — the foundation of the Honda brand. And even as it approaches the end of its life cycle, Civic remains the 11th-best-selling vehicle in the U.S. market.
Though Honda has significantly expanded its line-up in recent years, its newer models — both in the mainstream Honda and upscale Acura brands — have proved less than stellar successes, leaving many observers wondering whether the maker has lost its way.
“Honda has always been an innovative company,” said George Peterson, head of the market research firm, AutoPacific. “But lately they’ve been missing the mark.”
At first blush, that comment might come as a surprise. After all, the automaker posted a 16.1 percent sales increase in November, in sharp contrast to the decline reported by arch-rival Toyota. For the year-to-date, American Honda sales — which include the Acura division — total 1.101 million, up from 1.044 million during the first 11 months of 2009.
But it only requires parsing the numbers a bit to see what's causing Peterson and other analysts concern. Much of the recent sales surge is the result of the re-launched 2011 Honda Odyssey minivan, and to a lesser degree old-line models like the Civic, the Accord and, on the Acura side, the entry-level TSX.
But some of Honda’s more recent additions have either come in short of expectations or proved downright disasters. There’s no better example than the Acura ZDX, a quirky coupe/crossover blend that has been much-maligned by the automotive media and largely ignored by potential buyers. November sales totaled just 156, with year-to-date volume of 3,006.
The new Honda Insight, which was supposed to help the carmaker regain its early strength in the hybrid-electric vehicle segment, has also been a disappointment, selling at little more than a fraction of the anticipated rate. Analysts also have questioned the market performance of Honda’s other new hybrid, the sporty CR-Z, though company officials challenge that criticism.
“It’s doing well according to our expectations, though journalists think it should sell” much better, said Steve Center, American Honda’s national marketing director.
Center acknowledges there are some challenges facing Honda, though he points to the maker’s overall market performance as proof positive it is still doing well. If anything, its double-digit gain in November validates the maker’s decision to go light on its marketing budget, which lags competitors like Toyota in spending on both advertising and incentives.
The Honda executive also points to a curious quirk in Honda’s historical performance in the American market.
“In bad years, our share increases and in good years, it declines,” reflecting Honda’s policy of not trying to overbuild and force cars onto the market, even if that means occasionally being short of supply at the showroom level, he said.
Ironically, Honda has often done better in down markets than when the auto industry is in growth mode. Is Honda just following that pattern now?
Peterson and other analysts aren’t so certain. The weak performance of new models is troubling and could point to problems with more mainstream offerings, warns Joe Phillippi, of AutoTrends Consulting. The reaction to the new Civic, he suggests, will be a clear measure of what many believe is a misfiring design department.
“Their styling has gotten totally off-track,” contends Phillippi, pointing not only to the ZDX but also to the quirky look of the new Odyssey minivan, with its oddly-angled rear side windows.
Acura has taken the toughest criticism, much of it aimed at the almost comic book-style shield the maker has adopted for a grille on all of its offerings. Significantly, the upcoming Acura TSX Sport Wagon notably downsizes the vast chrome mass — which American Honda’s Center admits has been “polarizing.”
But Acura has other problems. It hasn’t regained its footing after a decision, some years ago, to abandon well-known brand names, like Legend, in favor of less distinctive names like TSX, RL and ZDX. The brand's difficulty defining itself compounds that issue. In recent years, even senior officials have questioned whether Acura is a luxury brand, after all.
“Anyone in this building who says this isn’t a luxury brand is mistaken,” Center said from Honda’s U.S. headquarters. But whether inside or out, he concedes “one of the problems we’ve
Internally, Honda is spending a lot of effort developing a clear focus for the Acura brand and Center promises that a wave of new products coming “within the next two years … will address this.”
Story: Automakers, utilities aim to make Calif. plug-in car leader
As for the Honda side, the carmaker is taking efforts to shore up weak offerings. There have been widespread news reports that the CR-Z will soon get a conventional powertrain to accompany the hybrid version, for example — something the company is, at least for the moment, denying.
“Their engineering still turns people on,” said Phillippi, who believes the automaker can recover from its current problems — especially the mainstream Honda brand.
One reason for that optimism is research by Experian Automotive showing Honda doing better than any other brand in picking up customers walking away from Toyota — still troubled by its ongoing safety and quality problems.
That could help Honda weather its own, less violent storm while it struggles to reconnect with the market. The response to the new Civic will be the first test of whether it is getting back on track.
Response to new Civic key to whether automaker getting back on track
Image: Acura ZDX
Acura
The Acura ZDX embodies Honda’s woes. The quirky coupe/crossover blend has been much-maligned by the media and largely ignored by potential buyers. November sales totaled just 156.
Image: Paul A. Eisenstein, msnbc.com contributor
By Paul A. Eisenstein
msnbc.com contributor msnbc.com contributor
updated 12/15/2010 3:23:42 PM ET 2010-12-15T20:23:42
Honda is getting busy, going into the holidays, offering automotive journalists a sneak preview of its most important product launch of the coming year.
The rendering of the all-new, 2012 Civic reveals a sleekly aerodynamic coupe, one Honda hopes will catch the eye of buyers in an increasingly competitive compact car market. Critics say the Japanese automaker may be losing its edge, and so the ninth generation of the Civic is going to be critical to Honda’s future success.
Scheduled to make its first formal appearance at next month’s Detroit Auto Show, the Civic has long been — along with the bigger Accord — the foundation of the Honda brand. And even as it approaches the end of its life cycle, Civic remains the 11th-best-selling vehicle in the U.S. market.
Though Honda has significantly expanded its line-up in recent years, its newer models — both in the mainstream Honda and upscale Acura brands — have proved less than stellar successes, leaving many observers wondering whether the maker has lost its way.
“Honda has always been an innovative company,” said George Peterson, head of the market research firm, AutoPacific. “But lately they’ve been missing the mark.”
At first blush, that comment might come as a surprise. After all, the automaker posted a 16.1 percent sales increase in November, in sharp contrast to the decline reported by arch-rival Toyota. For the year-to-date, American Honda sales — which include the Acura division — total 1.101 million, up from 1.044 million during the first 11 months of 2009.
But it only requires parsing the numbers a bit to see what's causing Peterson and other analysts concern. Much of the recent sales surge is the result of the re-launched 2011 Honda Odyssey minivan, and to a lesser degree old-line models like the Civic, the Accord and, on the Acura side, the entry-level TSX.
But some of Honda’s more recent additions have either come in short of expectations or proved downright disasters. There’s no better example than the Acura ZDX, a quirky coupe/crossover blend that has been much-maligned by the automotive media and largely ignored by potential buyers. November sales totaled just 156, with year-to-date volume of 3,006.
The new Honda Insight, which was supposed to help the carmaker regain its early strength in the hybrid-electric vehicle segment, has also been a disappointment, selling at little more than a fraction of the anticipated rate. Analysts also have questioned the market performance of Honda’s other new hybrid, the sporty CR-Z, though company officials challenge that criticism.
“It’s doing well according to our expectations, though journalists think it should sell” much better, said Steve Center, American Honda’s national marketing director.
Center acknowledges there are some challenges facing Honda, though he points to the maker’s overall market performance as proof positive it is still doing well. If anything, its double-digit gain in November validates the maker’s decision to go light on its marketing budget, which lags competitors like Toyota in spending on both advertising and incentives.
The Honda executive also points to a curious quirk in Honda’s historical performance in the American market.
“In bad years, our share increases and in good years, it declines,” reflecting Honda’s policy of not trying to overbuild and force cars onto the market, even if that means occasionally being short of supply at the showroom level, he said.
Ironically, Honda has often done better in down markets than when the auto industry is in growth mode. Is Honda just following that pattern now?
Peterson and other analysts aren’t so certain. The weak performance of new models is troubling and could point to problems with more mainstream offerings, warns Joe Phillippi, of AutoTrends Consulting. The reaction to the new Civic, he suggests, will be a clear measure of what many believe is a misfiring design department.
“Their styling has gotten totally off-track,” contends Phillippi, pointing not only to the ZDX but also to the quirky look of the new Odyssey minivan, with its oddly-angled rear side windows.
Acura has taken the toughest criticism, much of it aimed at the almost comic book-style shield the maker has adopted for a grille on all of its offerings. Significantly, the upcoming Acura TSX Sport Wagon notably downsizes the vast chrome mass — which American Honda’s Center admits has been “polarizing.”
But Acura has other problems. It hasn’t regained its footing after a decision, some years ago, to abandon well-known brand names, like Legend, in favor of less distinctive names like TSX, RL and ZDX. The brand's difficulty defining itself compounds that issue. In recent years, even senior officials have questioned whether Acura is a luxury brand, after all.
“Anyone in this building who says this isn’t a luxury brand is mistaken,” Center said from Honda’s U.S. headquarters. But whether inside or out, he concedes “one of the problems we’ve
Internally, Honda is spending a lot of effort developing a clear focus for the Acura brand and Center promises that a wave of new products coming “within the next two years … will address this.”
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As for the Honda side, the carmaker is taking efforts to shore up weak offerings. There have been widespread news reports that the CR-Z will soon get a conventional powertrain to accompany the hybrid version, for example — something the company is, at least for the moment, denying.
“Their engineering still turns people on,” said Phillippi, who believes the automaker can recover from its current problems — especially the mainstream Honda brand.
One reason for that optimism is research by Experian Automotive showing Honda doing better than any other brand in picking up customers walking away from Toyota — still troubled by its ongoing safety and quality problems.
That could help Honda weather its own, less violent storm while it struggles to reconnect with the market. The response to the new Civic will be the first test of whether it is getting back on track.
12-16-10, 09:49 PM
#6
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Thanks, 1SICKLEX for posting this new article. It is a shame how poor and arrogant management can ruin a company in this case Honda. I used to like Acura before, but the styling and the lack of direction pushed me away from the brand.
I took this picture of the RDX shield when I went to the SF Auto show. Just horrible and disgusting. I won't upload a picture of the front of the car because I am already having a hard time looking at the one I just uploaded.
I took this picture of the RDX shield when I went to the SF Auto show. Just horrible and disgusting. I won't upload a picture of the front of the car because I am already having a hard time looking at the one I just uploaded.
12-17-10, 10:21 AM
#7
Lexus Fanatic
One reason for that optimism is research by Experian Automotive showing Honda doing better than any other brand in picking up customers walking away from Toyota — still troubled by its ongoing safety and quality problems.
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12-17-10, 11:19 AM
#8
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When potential customers see how well many Honda products are built, they are often (but not in all cases) ready to forgive other things like quirky styling and the lack of an extra gear in the automatic transmission. I still think that, styling mistakes aside, they assemble a vehicle better, with equal or higher-quality materials, than any other mass-produced-vehicle automaker. However, there is no doubt that other manufacturers are catching up in the quality department.
12-18-10, 05:41 AM
#9
Lexus Champion
Quality engineering can only sell a car so much. No one really wants to buy a well engineered car if it's ugly as sin. I think Honda and Acura got a little complacent and expected the buying public to buy anything they put out just because it has an H or an A on the grill. 
12-18-10, 11:07 AM
#11
Lexus Fanatic
While the assembly-line defect-rate in new cars is, admittedly, quite low nowadays, I still see a number of cheap and/or poorly-fitted parts, particularly in some interiors. It is quite unpleasant, for example, to grab and rotate a **** that wobbles or feels like it's going to come right off in your hand, or rest your arm against cheap, brittle black plastic. But, agreed, relatively few vehicles have to come back to the shop today for assembly-line goofs....usually it is for engineering/design problems, like on the new Subaru Outback/Legacy.
12-18-10, 11:58 AM
#12
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While the assembly-line defect-rate in new cars is, admittedly, quite low nowadays, I still see a number of cheap and/or poorly-fitted parts, particularly in some interiors. It is quite unpleasant, for example, to grab and rotate a **** that wobbles or feels like it's going to come right off in your hand, or rest your arm against cheap, brittle black plastic. But, agreed, relatively few vehicles have to come back to the shop today for assembly-line goofs....usually it is for engineering/design problems, like on the new Subaru Outback/Legacy.
If the next gen of Honda/Toyota vehicles don't re-establish themselves as the best built cars for the dollar (as well as stop the ugly/bland) they will continue to be in trouble.
