By on January 18, 2010

Chart courtesy finance.yahoo.com

There has been a lot of, well, criticism, of Honda on these pages lately, including allegations that Honda had lost it. So far, more that fifty of the Best & Brightest offered advice on how to save the company from certain annihilation.

Today’s Nikkei says “domo arigato gozaimashita” for all the support, and runs a different story: “Honda Motor Co. has emerged from the economic turmoil at the head of the pack, thanks in good part to a nimble production network that can meet the latest consumer preferences at relatively low cost.” Here is why.

Honda Market Share USA Subcompacts 2009. Picture courtesy Nikkei.co.jpAccording to the Nikkei, Honda retooled its U.S. production operations in a mere six months last year, responding to the sudden demand for smaller vehicles. As the chart shows, the realignment translated into a substantial share of the U.S. subcompact market.

It is also the reason for Honda being “the only major Japanese maker likely to score a net profit” in the current fiscal year, says the Nikkei.

Capacity utilization rates at some facilities have been boosted by as much as 20 percent. In the current fiscal year, which ends March, Honda will most likely report an overall utilization rate of 79 percent, highest among Japan’s three largest automakers. In the industry, anything above 80 percent utilization is considered healthy. Given the worldwide capacity utilization, estimated to be between 50 and 60 percent, 79 percent are short of a miracle.

Honda can make smChart courtesy nikkei.co.jpall and large vehicles on the same production lines. All it needs is a quick change of welding pieces, paint nozzles and other components.

Not only the Nikkei is impressed with Honda, the stock market likes Honda as well. At the time of this typing, Honda’s stock (HMC) changed hands for $36.90 at the New York Stock Exchange, eclipsing its pre-carmageddon highs.

Honda may have “ugly styling highlighted by uglier front grilles; a hybrid system that simply isn’t as advanced and effective as Toyota’s; a bloated Accord; no new direct injection engines; lots of muddling about future EVs; and a misplaced optimism about fuel cells,” as Edward Niedermeyer wrote it.

However, Honda’s stock chart, a market capitalization of $67.7b, and a near-pornographic P/E of 47.92 on the other hand are a sight to be seen. Maybe you shouldn’t have bought the Insight. But you would be very pleased if you would have had the foresight to buy the Honda stock in December of 2008. You could have doubled your money.

Or, looking at the chart and all that’s wrong with the company, maybe it’s time to short HMC?

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20 Comments on “The Pretty Side Of Honda...”


  • avatar
    niky

    Production flexibility is something I’ve always admired at Honda.
     
    While they’ve undoubtedly had the market clout to chase bigger and bigger market shares like Toyota has… they have purposely limited production of vehicles in order to ensure that they can change over quickly when they need to. This keeps demand high, brand cachet high and gives them the ability to respond to market demands and needs quickly.
    I’ve been 50:50 on new Honda products… but they’re getting back in the groove after the anonymously bland EP Civic years… the GD and GE Fit platforms have been a huge hit, the new Civic is still near the head of the class (despite rock hard pews) amongst current compacts and the CR-V and Accord are solid, if somewhat unexciting, products.
    Honda is hitting the market where it counts. Small cars and first cars… building up a customer base that will stay with them for decades to come.

  • avatar
    texlovera

    If someone asks me, “which is the best car company”, I’m going to answer Honda.  I think a whole lot of other folks will, too.

    Is it possible we’re wrong?  Sure.  But that doesn’t change the fact they’re still ahead of everyone else as far as consumers’ perception of the automakers.  And that counts for a hell of a lot.

    Now the trick for Honda is to stay there.  Based on their past performance, they seem to know how to pull this off.

  • avatar
    Mark MacInnis

    Saw many TV ads for the new Crosstour over the weekend….reminded me of Coke ads from the day…witty, engaging, demanding of attention.

    Doesn’t matter that the car is an abomination from design hell…..Honda will sell every one they build…..they know how to built and market cars in such a way that makes people want ‘em, even if they aren’t exactly hip.

    Soichiro said he didn’t want to be the biggest car company, just the most profitable.  For this year, in Japan, it appears he got his wish…

  • avatar
    imag

    “Honda may have “ugly styling highlighted by uglier front grilles; a hybrid system that simply isn’t as advanced and effective as Toyota’s; a bloated Accord; no new direct injection engines; lots of muddling about future EVs; and a misplaced optimism about fuel cells,” as Edward Niedermeyer wrote it.”

    It feels like that sentence is missing something at the end, like a “but” connecting it to the sentence following it.

    Anyway, it’s great to see that Honda is getting something right.  Maybe it will give them the money to build a car I’d want to buy again.

  • avatar
    Gardiner Westbound

    Glad to learn Honda had the foresight to build flexible manufacturing facilities that are rapidly adaptable to the market. Imagine how much better things would be if the cars they produce were more desirable.

  • avatar
    ravenchris

    I can’t justify the price of a new honda. Frequent reliability, ho hum styling and the ubiquitous brand name works only as long as most of the competition produces less than mediocre products.

  • avatar
    blue adidas

    As an investor, this is interesting. However as a consumer, Honda has completely lost the appeal that it once had. When I walk into a showroom, I don’t really care about the company’s stock value. I care about the cars. I suspect that Hondas are only selling today because of latent demand resulting from decades of great cars. But they will actually have to start building good looking cars again for that to continue much longer.

  • avatar
    don1967

    But you would be very pleased if you would have had the foresight to buy the Honda stock in December of 2008.

     
    Sure, but all you would have been doing is playing the same sentiment reversal which applied to just about every other stock in 2009.    Any resemblance between this chart and actual business fundamentals is purely coincidental.
     
    What matters now is that we’ve got an overpriced car company competing against government subsidies, Hyundai, and it’s own product designers.   Look out below.

  • avatar
    Sinistermisterman

    The simple fact is that the general car buying public, who in general have no taste – like Honda’s. They buy them because they are generally reliable and don’t depreciate like a Chrysler. This combined with a rather clever, flexible production facilities means that no matter how much car obsessed types like us complain about the fact that many of their cars designs are now obese and ugly, people will still buy them and Honda will still make money.

  • avatar
    AJ

    I will agree that Honda’s styling is unique and at times ugly.
    However they still produce great vehicles and it’s hard not to buy one. About a year ago I bought my third Civic as a new daily driver and it’s the best Civic yet. It’s the kind of small car that Detroit still can’t compete against.

  • avatar
    George B

    Soichiro Honda was a very unique hands on executive.  http://www.answers.com/topic/soichiro-honda  I have read that he bought machine tools from a company in Ohio when he was starting manufacturing in Japan and that connection influenced the Marysville site selection.
    Honda has been very lucky to have been ready to produce the Civic and Fit when fuel prices spiked up and small car demand increased.  Looks like they were flexible enough to take advantage of the change in consumer demand.
    I like the current Civic, but it would be improved with less windshield rake, a more conventional dash, and better interior plastics.  Wish the current NA Honda Accord ignored European pedestrian safety and removed nose bulk hanging out in front of the front wheels.

  • avatar
    stuki

                    I wonder if wanting to maintain this production flexibility is part of the reason for Honda’s insistence on manufacturing parts and components in house, versus buying from third parties the way many others do.
     
                    And it could also help explain their reluctance to quickly embrace technologies requiring production lines not quickly adaptable if end user demand changes, such as DI and turbos which may be too expensive for lower end models.
     
                    Anyway, in an increasingly volatile world, with gas price outlook swinging between peak oil and 10 million barrels per day coming online from Iraq, it sure seems like a nice strategic strength.

  • avatar
    jaje

    Honda makes cars that are like appliances now.  That is mass market.  That has turned me away from them as I was a major Honda buyer but now look elsewhere for a car tuned more for the driver and light enough to make it nimble.
     
    I do look up to Honda for being smart even though they have gone down the avenue of bland A-B vehicles and lost their excellent innovation.  By making their factories the most efficient in the world they can response faster than any other automaker to change to demand.  That is a critical piece that helps them keep up profitability and not have to market cars with huge discounts to buyers who did not originally want the vehicle (plus helps resale value substantially).  As much as I criticize Honda – kudos to them for at least running their company lean (much the opposite of GM whose company is full of yes man and fiefdoms that constantly battle each other).

  • avatar
    jaje

    Honda makes cars that are like appliances now.  That is mass market.  That has turned me away from them as I was a major Honda buyer but now look elsewhere for a car tuned more for the driver and light enough to make it nimble.I do look up to Honda for being smart even though they have gone down the avenue of bland A-B vehicles and lost their excellent innovation.  By making their factories the most efficient in the world they can response faster than any other automaker to change to demand.  That is a critical piece that helps them keep up profitability and not have to market cars with huge discounts to buyers who did not originally want the vehicle (plus helps resale value substantially).  As much as I criticize Honda – kudos to them for at least running their company lean (much the opposite of GM whose company is full of yes man and fiefdoms that constantly battle each other).

  • avatar
    James2

    Plant utilization and stock prices… two reasons to buy a Honda… right!
     
    I like the looks of the Civic sedan and wish they had transferred some of its design to the Accord, but instead they went and Bangled it. Not to mention Super-sized it.
     
    We’ll just have to accept that Honda marches to its own beat. I’m just glad Mazda is around, goofy-looking grilles included.

  • avatar
    niky

    I challenge anyone to drive a Fit or a Civic hard and call it an “appliance”.
    While the Civic lacks that playful demeanor that made the EF-EK models so beloved of enthusiasts, it is fast, responsive and has a class-leading engine.
    The Fit is a car that appeals on all levels,  cerebral, practical and playful. Even when another car is superior to the Fit (the Mazda2/Fiesta come to mind)… they can’t beat the class act that the Fit has. It’s just fun enough, just smart enough… and twenty times more practical than cars twice the size.
    Honda may be stumbling with the Accord and CR-V… but the Accord is still a solid car in its class, with many good points for and very few against… and the CR-V is a decent all-arounder. Honda may have made a few mis-steps here and there… but not where it counts.
    Toyota, on the other hand, has some good cars… but none you’d call excellent. And their small cars, the Corolla and Yaris, are pathetic. Only one company makes small cars that are better than Honda’s (in this price range), but they’re smaller cars, and don’t have the tech package in the engine and transmission department to keep up (Mazda).
    Bash Honda all you want… but at the end of the day, they make great engines and good cars… and it’s something customers rightfully recognize.

  • avatar
    Stingray

    Good analysis on the stock price. However, despite the loses, Toyota’s stock has raised to 90 from 60 last year. And it has been steadily going up.
     
    Same for the Ford stock. But in this case, you’d have earned 10 times your investement, from 1$ in about June-July to the 11 posted today.
     
    Sadly, I didn’t purchase them. What is the minimum in $$$/stocks than can be purchased in of one company? Because, even starting with peanuts you could build a nice amount in some months with clever buying/selling. And still have  stocks.

  • avatar
    AccAzda

    Hmmmm

    I find it quite amazing to look at:
    Honda of Japan
    Honda of Europe
    Honda of US / Canada and Honda.

    The US stuff… or the stuff we get.. has got to be some of the worst inspiring crap… that Honda produces.

    Yes, we get a CUV that shares parts with the Ridgeline and the Ody. We get a BASE version of a very nice, but PORKY car for the US..
    http://www.zcars.com.au/images/honda-inspire-modulo-concept1.jpg

    Against a

    http://www.caradvice.com.au/wp-content/uploads/2009/10/HondaAccordLimitedEdition.jpg

    We get a 2dr and a 4dr Civic, paired with a Si, thats weak as hell. Ya got competitors that do much better with less, ntm a high displacement motor, better interior design.. AND more variation on a sport model

    I mean C’MON, Honda CAN produce a 3and 5dr hatch, along side a 2 and 4dr with the Si. But it might intrude on the Fit / Jazz production.

    Heck..
    Honda is the most nimble in production OUT OF any of the Japanese (besides Toyota) but the amounts that even THEY sell is BADLY tilted towards the heavy and useless shit.

    In the US market, ya got the 2.5 Mazda 3 hatch, a GTI with a TURBO, Impreza with awd and the WRX (the domestic stuff from FORD is a couple of years out).. but there is plenty of competition.

    I could even live with the bad interior of the Civic is the body was in more variations…

    Jeez..
    Who gets the shaft?!

    Now from someone who would buy their stock..
    They are a stable company, with manufacturing prowess, full flexibility and if ya buy into how Honda builds an interior, or justifies 2 vehicles for a 3 or 4 range or how lack of hatches in the U.S.. then its all understandable.

    Buying Honda stock.. is a shoe in.

    And I for one.. base my opinion not just from what I see in the U.S, but from everywhere on the globe. If the company isnt doing well financially.. then buying their stock is pointless. Ex FORD and their stock v GM and theirs.


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