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The threat to Honda's mojo


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The threat to Honda's mojo

Year of opportunity goes in reverse for brand

The Accord Crosstour: Getting thumped by the Toyota Venza

Mark Rechtin

Automotive News -- December 6, 2010 - 12:01 am ET

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But other problems -- such as declining buyer consideration, an outdated inventory system and a sliding reputation among younger car shoppers -- suggest a brand that has lost some of its mojo.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 APPEAL

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."

GOOD AND BAD NEWS

PRO

• Odyssey starting well

• Civic, CR-V coming in 2011

• Low inventories

• Strong retention

CON

• Lackluster launches

• Staid styling

• Obsolete allocation system

• Fewer cross-shoppers

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20101206/RETAIL03/312069954/1178#ixzz17L7oOv6j

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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.

I stopped reading there. It's annoying that every other autorag thinks that Honda's aim is the same as Toyota's or Hyundai's. If History has taught us anything, it's that Honda has never sought more than small, steady gains year-over-year. They've never whored out to fleets to boost sales figures and have always focused on incremental improvements.

Honda is on track for a 6% improvement this year, which is above their average. They didn't fall nearly as far as almost all other automakers did during the recession, and haven't had to bounce back as far. They remained profitable for the year in both 2008 and 2009. The idea that Honda is failing because they aren't having colossal gains right now is ridiculous and short-sighted.

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See, the problem is you stopped reading at that point... and missed parts like:

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.

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.

and the biggie in my opinion:

"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.

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CR-Z, Crosstour, Insight sales hurting - Odyssey lone bright spot among new Honda models

by Zach Bowman (RSS feed) on Dec 6th 2010 at 7:29PM

cr-z-630.jpg

Honda has hit rough water with sales of its new CR-Z, Accord Crosstour and Insight models According to Automotive News, the three models are underperforming in a big way.

Take the Insight hybrid, which is falling 40,000 units short of even the most conservative estimates inside the company. Outsold 8-to-1 by its Toyota Prius rival, Honda has only managed to shift 19,325 units through November – the company originally targeted sales of 60,000 to 80,000.

Likewise, thus far this year, Honda has sold nearly 20,000 fewer Crosstour models than its biggest competitor – the Toyota Venza, selling just 25,927 units compared to the Toyota's 43,325. Need we remind you, Honda's original sales goal for the Crosstour was 40,000 units per year, a number we were deeply skeptical of after first driving the vehicle at its launch last November.

Although it hasn't been on the market that long, early sales for Honda's new CR-Z hybrid coupe aren't any more encouraging. Automotive News reports that Honda had conservatively intended to sell around 15,000 of the two-seat hybrids per year, but so far, only 4,373 have made their way off of dealer lots and another 3,000 are currently sitting in inventory. Thankfully, there is one bright spot in the Honda stable – the 2011 Odyssey. The minivan bowed in September, and it's performing well against a minivan segment that has heated up with a range of new competitors.

Automotive News suggests that the problem boils down to a change in Honda's image from a company with compelling products to one that plays it safe. Throw in styling that isn't for everyone and aging (but still selling) models like the CR-V and Accord, and you've got a recipe for decreased market share.

Honda, meanwhile, says that it doesn't focus on market share because that leads to bad habits (read: incentives), instead opting to focus on percentage-increases in vehicles sold. That's a fair strategy, but slow sales of key new models suggest that Honda needs to do some soul-searching. Might we suggest getting back to its roots as an engineering-driven car company?

LINK:

http://www.autoblog.com/2010/12/06/cr-z-crosstour-insight-sales-hurting-odyssey-lone-bright-spo/

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I"ve never been a huge fan of honda but I will admit their styling (this includes Acura) was always very clean & evolutionary.

It was boring but seldom did they have an all-out ugly car. Recent times have reversed this. The Pilot is outright nasty

looking, like a cheap Chinese made toy ugly... worse still the Civic is goofy, the Accord is awkward & the Acura lineup

has gone completely off the deep end. That Buggs Bunny chrome tooth thing: it's disgusting, and what's more at a time'

then Kia & Hyundai are even making many clean looking (in some cases quite elegant) cars Acura looks like a joke.

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Honda is on track for a 6% improvement this year, which is above their average. They didn't fall nearly as far as almost all other automakers did during the recession, and haven't had to bounce back as far. They remained profitable for the year in both 2008 and 2009. The idea that Honda is failing because they aren't having colossal gains right now is ridiculous and short-sighted.

If the industry gains by 17% and a particular company, which is perceived to have a solid brand image grows by 6%, what does that indicate?

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That indicates that there is CLEARLY a shift in consumers minds:

i.e. Honda is over rated & has "lost its way"

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I stopped reading there. It's annoying that every other autorag thinks that Honda's aim is the same as Toyota's or Hyundai's. If History has taught us anything, it's that Honda has never sought more than small, steady gains year-over-year. They've never whored out to fleets to boost sales figures and have always focused on incremental improvements.

Honda is on track for a 6% improvement this year, which is above their average. They didn't fall nearly as far as almost all other automakers did during the recession, and haven't had to bounce back as far. They remained profitable for the year in both 2008 and 2009. The idea that Honda is failing because they aren't having colossal gains right now is ridiculous and short-sighted.

kool-aid-man.jpg

HYUNDAI CHEVROLET FORD MAZDA(3)

this is why Honda is sucking ass, in addition to their bad styling.

me, I am a fan of the CRz, the Odyssey. The TSX and TL are both good but cost more than the average buyer wants to pay. All the Crz needs to reclaim the rice set is a hot real 4 pop turbo powertrain or something. The Fit is dorky looking and underpowered and cannibalizes the Civic. The Accord is a true 'epic fail'. Crosstour, ZDX, Ridgeline, Pilot, Insight,,,,,,the ugliness!!!!!!! CRV is tired and dull!

All Honda needs is a few things. A new Civic and Accord, all new with loads of value performance and knockout styling. Civic needs to beat all comers. May even need an EVO STi fighter. Merge the Fit line into the Civic. Dump the Crosstour. New Pilot that doesn't look like the shipping container it came in. CRV with harder edge and not so much for the feminine set. Bring back a real coupe like the Prelude. Honda needs a City car like the Smart or Spark.

An Integra line. Bring back the Integra! I would even say Honda needs the Legend and NSX or whatever that was again. Rethink all the Acura crossovers. S2000 should be reborn as an Acura.

Redo the insight. Add a more useful hybrid Civic and Accord.

Edited by regfootball
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the accord is an epic fail because it lost is mojo and it lost its teflon grip on the public.

the accord and civic are honda's lifeline. giving away the accord's market equity is like stabbing yourself in the eye with a great big knife.

in that regard, the conscious manner in which they have done it, classifies as epic fail.

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The Odyssey is a good vehicle, probably the best van, and the van segment is rather small, only Chrysler/Dodge, Toyota and Nissan really competing with the, so that is a strong spot for Honda. Civic and Accord sell well and always will, because of the fuel economy, reputation and dependability.

The CR-Z is a slow sports car, of course it is tanking. The Crosstour is expensive and ugly and the Insight is a Prius knockoff with worse gas mileage. No surprise those new models aren't selling well, they don't offer anything great.

The other factors are that Ford has improved, and Hyundai is surging and taking market share.

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Reg: / OB:

Teflon Grip: hmmm.... we should look into that. :alcoholic:

I'm thinking Teflon Drag Radials... we'll get the Mickey Thompson people on the phone.

How about these other awesome inventions I'm working on:

- Fire Retardant Scented Candles

- Tampons made of Sandpaper

and my personal favorite:

- A Poly-carbonate, Kevlar jacketed PAPERWEIGHT (with a built in titanium heat-sink & redundant flux capacitor)

Reg: maybe perhaps you meant the way Teflon sticks to the pan but stays easy to clean.

Edited by Sixty8panther
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