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Honda feels squeezed by Koreans, Detroit 3

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Honda feels squeezed by Koreans, Detroit 3

Hans Greimel

Automotive News -- May 3, 2010 - 12:01 am ET

TOKYO -- Honda Motor Co., fresh off a 92 percent jump in annual operating profit, says it is feeling the pinch from Hyundai and Kia on one side and a more competitive Detroit 3 on the other.

Executive Vice President Koichi Kondo says inexpensive Korean brands are appearing increasingly on Honda's cross-shopping lists. At the same time, Honda's U.S. rivals are refocusing on small and mid-sized sedans after the slump in light-truck sales.

"Since the Lehman Brothers shock, the Big 3 have been re-emphasizing passenger cars like the Civic and Accord," Kondo said while announcing the Japanese automaker's earnings for the fiscal year that ended March 31. "Competition in that segment is really increasing."

He added: "We will have to develop better product so as not to lose."

Despite the increased rivalry, Kondo said he expects Honda's per-car incentives to remain mostly flat compared with last year. But overall spending probably will rise with higher volume.

Honda forecasts North American sales to climb 14 percent to about 1.5 million vehicles in the current fiscal year, ending March 31, 2011, from 1.3 million in the year that just ended.

So far this year, Honda has failed to capitalize on Toyota's lost U.S. market share. American Honda's share fell to 10.1 percent in the first quarter from 10.5 percent a year earlier.

While Honda-Acura lost ground, Ford Motor Co., General Motors Co. and Nissan North America took a piece of Toyota's 1.2 percentage points in lost share. Volkswagen Group gained 0.5 points.

Last month Honda launched an incentive program that lets customers lease the Accord, Civic and Insight cars and the CR-V, Pilot, Element, Odyssey and Ridgeline light trucks with no down payment or security deposit and no money due for a month. But the company has not resorted to the cut-rate financing or cash rebates rolled out by Toyota, Ford and GM.

Meanwhile, U.S. inventories have returned to normal levels, Kondo said.

Honda had a 74-day supply of Civics on April 1, down from 96 days a month earlier. It had a 65-day supply of Accords, down from 78 days on March 1.

Honda reported a 92 percent increase in operating profit to ¥363.7 billion ($3.92 billion) in the year that ended March 31. Net income rose 96 percent to $2.90 billion.

Read more: http://www.autonews.com/article/20100503/RETAIL02/305039972/1424#ixzz0msCzLfe4

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