Editorial: The Real Honda is in Real Trouble

Americans are accustomed to thinking of Honda, Toyota, and Nissan as being the “Big Three” of Japanese auto production. Not quite. Honda sells more Civics in the United States than they do cars in Japan. A quick troll through Honda’s annual report reveals a corporate iceberg: The tip: Japanese-market auto and motorcycle sales. The nine-tenths below the surface: North American cars-– and Chinese scooters (by unit volume are Honda’s best-selling products).

More than any other Asian automaker, Honda’s fortunes are tied to the United States. The collapse of the American auto market would effectively turn back the company’s clock to 1970, making them once again a small-time producer of two-wheeled vehicles for emerging markets.

So what? Honda’s the small car company! Surely, they’ll benefit more than anyone else from the recession-that-isn’t-quite-yet-a-depression? Not so fast…

When Honda began producing Accords in Ohio twenty-six years ago, all of their cars were smaller than a Chevrolet Citation. Today, the upmarket versions of the Accord tip the scales at close to two tons, while the Civic is bigger than BMW’s 135i. The 2009 Fit is certainly small, but in stick-shift form it can’t even match the Chevrolet Cobalt XFE or (gasp) Ford Focus for EPA highway mileage.

Time for that iceberg analogy again: the public image of Honda in the United States is as a purveyor of small, fuel-efficient models, but the bulk of their sales happen below the water with the Accord, the Acura TL, the forty-five-hundred-pound Pilot and the Cyclops-sized Odyssey. Nor could Honda quickly change their Marysville, Ohio and Lincoln, Alabama plants over to small-car production; these facilities are built around Accord-width vehicles and would require a nontrivial investment of time and money to retool.

Faced with a market which preferred the Fit to the Acura MDX, Honda might just do the easy thing and bring Fits in from their Chinese factories, allowing them to scale back US production to the bare bones.

Honda has plenty of money in reserve– over nine billion dollars in cash and investments. As we’ve seen in the past few months, it’s easy to burn through billions of dollars if you can’t move the metal. Some of that money will also be needed to expand motorcycle production for the Chinese market, and you can bet that, given a choice between spending money in a collapsing American economy or making money in an expanding Chinese one, Honda’s board of directors will choose the sure thing.

While relatively adventurous by the standards of other Japanese companies, Honda doesn’t like to take any risks which aren’t absolutely necessary to its survival.

That same relentless pragmatism has informed Honda’s indifferent attitude towards its enthusiast owner base in the past decade. It has now been a full decade since Honda introduced a new sporting vehicle for the American market. The S2000, introduced to compete with the BMW Z3 and first-generation Boxster, now faces the second-generation Z4 and the second variant of the second-generation Porsche. The Acura NSX, fresh from the indignities of a bug-eyed facelift and a mercy killing, is now officially an orphan.

When times are good, Honda doesn’t do much for their biggest fans; when times are tough, it does nothing at all. The company which powered the mighty Ayrton Senna to three World Championships has just abandoned his nephew Bruno in its ignominious quick-march backwards from Formula One, an unfortunate coincidence that emphasizes Honda’s unsentimental attitude towards the men and women who are fans, not merely owners.

In a perfect world, Honda’s reaction to an economic crisis would be the creation of exciting, enthusiastic cars that met the needs of the economist, the enthusiast and the environmentalist in one brilliant design. It’s happened before: the 1989 Civic Si that I am contracted to drive in NASA’s endurance-race series next year is a prime example of a car that was all things to all small-car buyers. Today’s tubby Civic, lumbering beneath the burden of half again as much weight as its predecessors, isn’t the car for the job, and two-ton Accords won’t carry the company very far into a fuel-starved twenty-first century.

Perhaps the new Insight will be the answer to Honda’s problems. I suspect it will be nothing more than a pale Prius copy. The next generation of Honda cars needs to recapture the tradition of those brilliant early Civics and Accords. More importantly, the company needs to recapture its bond with its most fanatical owners. Without that bond, well, another quote from The Usual Suspects: “And like that, poof. He’s gone.”