Honda Profits Rise

by John Horner

Published: July 25th, 2008

Bucking the tide, Honda announced an eight percent increase in profits for the April-May-June 2008 quarter. Profits would have been higher still were it not for the incredible shrinking US greenback. The Financial Times tells us that "the yen's sharp rise compared with early 2007 – it hit a 12-year high against the dollar in March – reduced the value of its overseas sales and turned what would have been a 7.1 percent first-quarter revenue increase into a 2.2 percent fall." With over 50 percent of its business in the stricken US market, higher raw materials costs and a mix-shift away from higher-priced large vehicles to low-cost cars Honda still pulled a profit increase out of the hat. Then, there is what being able to nix the cash-on-the-hood for your best sellers does for a business. Sure the Pilot, Ridgeline, Odyssey and MDX need incentives to move; but the Fit, Civic, Accord and CR-V are all selling with no rebates and no dealer "marketing support". Meanwhile, over at your friendly Saturn dealer there is cash on the hood of ANY 2008. Even with today's good news, financial analysts are spooked by Honda's warnings that the second half of the year is likely to be more difficult than the first half was and that total fiscal year profits are likely to be down by 18 percent. Honda stock swooned two percent today, but GM dropped eight percent.

John Horner

More by John Horner

Comments

Join the conversation

4 of 21 comments

Lynn Ellsworth on Jul 27, 2008
Author: Mark45Comment:folkdancer, the Ridgeline is supposed to compete against the Chevrolet Avalanche but it falls far short in capability. The Ridgeline is a unibody construction vs body on frame of the Avalanche. The Ridgeline towing capacity is 5000# vs 7000# for the Avalanche. The Ridgeline has a V6 vs the Avalanche V8 with nearly 100hp & 100# torque more, and the EPA mileage rating on the Ridgeline is 15/20 vs 14/20 for the Avalanche. Thank you for the comparison. Much of the comparison would interest me in the Honda but the terribly poor mileage is a turn off. I like the idea of unibody construction, simpler engine, and 5000 pound towing capacity is far more than anything I need but how or why did Honda screw up on the mileage so bad?

Like Reply
Oboylepr on Jul 27, 2008
True, but the majority of Avalanche owners never use anything close to the “capability” of the vehicle. This is so true. Since a friend of mine was foolish enough to buy one I have been on the lookout for an Avalanche doing 'a bit of work'. In 3 years, living near Canada's GM town (Oshawa ON), I have never seen one yet hauling anything except once when I passed an Avalanche with Maryland plates pulling an Airstream. My friend's truck never does anything but get him back and forth to work except when it's in the shop with it's chronic brake problems. "Let me know if you need to haul anything" my friend says! When the time came and I needed to bring a trailer load of junk to the landfill it was in the shop having it's rear brakes fixed for the umpteenth time. I was in a bit of a bind when someone else stepped up to the plate with a... you guessed it, a Ridgeline! Oh the irony of it all! Mission accomplished, Ridgeline 1, Avalanche 0.

Like Reply
Pch101 on Jul 27, 2008
In 3 years, living near Canada’s GM town (Oshawa ON), I have never seen one yet hauling anything except once when I passed an Avalanche with Maryland plates pulling an Airstream. A lot of these vehicles are sold for their potential, not for their actual usage. These features have been important for generating sales, even though most people don't use them. Many SUV and truck buyers wish to feel like urban warriors and rugged individualists, even if they only use the vehicle to haul groceries. Ford ended up adding 4WD to a lot of Explorers that they knew that buyers would never take off-road because their market studies showed that customers wanted it. This probably helps to explain why the sales are falling through the floor -- despite their protests, deep down, these buyers know that they don't really need these vehicles. They aren't willing to pay the freight when the price of admission at the gas station is as high as it is today.

Like Reply
SherbornSean on Jul 28, 2008

While GM fights off rumors of bankrupcy, Honda enjoys its best quarter in history. And all we can talk about is how the Avalance kicks butt over the Ridgeline? OK, I like this game. So now let's compare the Aveo to the Fit, the Cobalt to the Civic, the G6 to the Accord and any GM minivan to the Odyssey. Or the Equinox to the CR-V, the Trailblazer to the Pilot, the SRX to the MDX and the LaCrosse to the TSX. Having fun yet?

Like Reply