By on December 20, 2008

“La plus belles des ruses du diable est de vous persuader qu’il n’existe pas.” Baudelaire, straight out of The Usual Suspects. And while the world focuses on the usual suspects of the auto-industry collapse, something odd is happening over in a shadowy corner: Honda is running scared. It’s been less than four months since the Civic sold more than fifty-two thousand units in a single month, toppling the almighty F-150 from its two-decade-long run as the best-selling vehicle in the United States, but if anybody at the Big H is celebrating, they’ve apparently decided to hide their exuberant light under a bushel of program cancellations, production cutbacks, and a panicky sale of their backmarking F1 team. Why? Surely, if anybody’s in good shape to survive the coming catastrophe, it’s Honda; they have the small cars people “want,” unimpeachable planet-friendly credentials, and a solid base of non-union production. What’s causing them to huddle behind their hurricane shelters? The answer’s simple: when it comes to Honda, reality is very, very far away from the public perception.

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.”

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40 Comments on “Editorial: The Real Honda is in Real Trouble...”


  • avatar
    KalapanaBlack

    Two thoughts:

    -The S2000 has already officially been killed. Honda produced a few last-run CR models (Club Racer) for 2008. However, since the car rarely sold, there may still be quite a few regular and CR models on dealer lots.

    -I understand you may be personally disappointed that Honda doesn’t support its fan base (as seperate from consumer base) as much as you’d like, but being a Honda fan doesn’t net the corporation much money. If you just go around saying you like Honda and spouting historical facts about the company, you don’t earn them a red cent. Buy an Acura MDX, however, and they make a tidy profit. As a corporation, who do you think makes the better business case for support? Further, you decry their abandonment of Formula 1, but note that they only have a finite cash hoard (as opposed to…?) and that it’s frighteningly easy to spend through billions of dollars quickly these days. If America is their biggest car market (as you state), and F1 is unpopular in America (a proven fact), why spend hundreds of millions of dollars every year on a publicity stunt that doesn’t reach your core customers?

    Far from being a personal affront to fans, I see all of your supporting evidence as simple, wise business decisions. A history of similar decisions is why Honda is around today, not living off of government subsidies (FIAT), begging for nickels and dimes to keep operating (GM, Chrysler), or mooching off of corporate parents (Mitsubishi).

  • avatar
    Pch101

    Sorry, but I don’t see it, and if you look at their numbers, I think that you’ll have a tough time seeing this, too.

    Honda is a nimble, profitable company that can cut its expenses to get through an economic crisis. Even if 2008 revenue declines 20% from that of 2007, that puts it back to where it was in 2005. Not great, but something like that should be manageable.

    Honda may have a brief period of losses, and at the very least, you should expect lower profits. However, the company has enough reserves and cash flow to get through a recessionary downturn. There is absolutely no comparison to what is happening in Detroit. Honda’s burn rate is half of GM’s, so you can’t compare that directly with GM.

    Most companies don’t make as much money during bad times as they do during good ones. That doesn’t mean that they are all going to fall off of a cliff. The well managed ones will get through it.

    Where this may rear its ugly head could be in delays in product development. Those costs can be controlled by slowing things down. So if the product cycle is a bit longer this time, don’t be surprised.

  • avatar
    KalapanaBlack

    Sorry, I take back the S2000 statement. Honda has 2009 models listed on their website, including the CR in a different color than was available in 2008.

    I’d bet $100 that I read 2008 would be the last year, with the limited-run CR ending the model life. Ah well.

  • avatar
    toxicroach

    I’ll grant you there has been some major increases in size.

    I think the Fit is probably about the same size as some of the early Accords, buy who is making cars that size anymore anyways? Mini?

  • avatar
    bluecon

    The premise of the article that Honda is reliant on the US market and that is their achilles heel is wrong. And the price of gas is falling rapidly which will negate the advantage of buying small cars. The Japanese market is tanking just as badly or worse as are most other markets with China also starting to tumble. No company is going to escape this without painful cuts. F1 is a tremendous cost and likely a very wise choice that it was cut.

    The companies that react quickest to the downturn will have the best long term survival

  • avatar
    Hippo

    They will get killed on their Japan production because the dollar is falling like a rock against the yen.

    On the other hand even if demand in the US falls below 10m vehicles, they have a very good reputation and will lose much less market share then others to the extent that they can produce in the US

  • avatar
    Pch101

    I know that there are Honda enthusiasts posting here and elsewhere who decry the rising size of the Accord. But the sales figures indicate that the size isn’t a problem at all.

    Honda is still going to sell over 350,000 of these in the US this year, and that’s in spite of the economy falling apart. What Honda does that is different is that it tries to use the Accord in the US to fill slots that its rivals use two cars to fill, namely Avalon/Camry and Maxima/Altima.

    Size conscious enthusiasts can buy the TSX. Obviously, there aren’t a lot of enthusiasts, because the TSX is a low volume car. On the whole, Americans do like larger cars, and the Accord suits a lot of tastes. Those people may not post here, but they go to dealerships and actually buy the car.

  • avatar
    porschespeed

    All cars are bigger than they used to be in the 80’s. Period.

    Beyond market-driven NVH and comfort expectations, the rest of it is simply the inevitable growth that comes with safety standards.

    Do I think it’s pretty silly that a new E-class would look large next to the mid-80’s gray-market S-class I used to own? You betcha. While the reliability isn’t on par with the old W126, that new E is safer. And quieter. And….

    Everything Honda is doing right now is what they should be doing to keep the company viable. We can argue the details, but a going into crisis mode somewhere near the beginning of the crisis, is the only way to survive aforementioned crisis.

    Don’t get me wrong. From all indications, 2009 is gonna suck. Especially if you have anything to do with the new car chain. But I just didn’t see anything in the piece that gives me cause for pause, when it comes to Honda’s survival.

  • avatar
    Gardiner Westbound

    Honda seems to have lost its engineering mojo. Notwithstanding our Honda and Acura products have been excellent, our most recent purchase is an Infiniti.

  • avatar
    Nicholas Weaver

    I think there are some errors here:

    a) Enthusiasts are a small fraction of the market. Abandoning the “enthusiasts” works. And they DO offer things for the pragmatic enthusiasts, eg, the current Civic Si.

    b) Honda is very good at making and modifying plants for a huge range of vehicles. Look at the line which produces the Ridgeline in Canada: It can shift on a vehicle-by-vehicle basis to Civics. I would be that it is far less costly than the editorialist thinks to shift capacity at the Marysville plant to Fits should Honda desire.

    c) The fit’s mileage is aerodynamic limited. ANYTHING thats a short hatch will get worse mileage than a slightly longer sedan.

    d) Which would you rather drive, a Cobalt XFE or a Fit?

    e) Honda may have said F-off to F1, which is a lot of money but NO respect and NO R&D gains. Such ego-racing as F1 and Nascar are wastes of carmaker money. Honda just recognises it as such.

  • avatar
    dkulmacz

    The shoe never looks quite as good when it’s on the other foot, does it?

  • avatar
    ihatetrees

    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.

    Well, you can’t make an ’89 Civic Si with today’s so-called safety requirements at a reasonable price point.

    Today’s Si doesn’t have the same nimbleness or visibility, but it’s very good. And if that’s not enough, aftermarket tunerz can hook you up.

  • avatar
    rodster205

    Jack, since I read S:S:L I have an appreciation for your use of exaggeration to make a point. However, here on TTAC we require a little more accuracy. One word for your comparisons: Bullshit.

    Here are a few facts you (or RF) should have looked up, from each Mfr’s websites…

    Civic DX Sedan Manual: 2630 lbs.
    Civix EX-L Sedan Auto: 2831 lbs.
    Civic Si Sedan Manual: 2954 lbs.
    BMW 128i Coupe Manual: 3252 lbs.
    BMW 135i Coupe Auto: 3384 lbs.

    Accord LX 4cyl Sedan Manual: 3230 lbs.
    Accord EX-L V6 Sedan Auto: 3600 lbs.
    BMW 328i Sedan 2WD Manual: 3340 lbs.
    BMW 335i Sedan 2WD Auto: 3594 lbs.

    So the heavest 4-door S1 Civic is still 250 lbs. lighter than the LIGHTEST 128i… Care to revise?

    I continually see the Accord & Civic blasted as “heavy”, “fat”, etc. Compared to past Honda models that is true, but really not much comparing 4cyl versions, and compared to almost all competitors they are still lighter. The problem is that they went away from the double wishbone suspension so now they FEEL just as fat and heavy as the the other ones because they handle just as badly.

    The Civic is bigger than the 1-series and the Accord is bigger than the 3-series. So what is BMW’s excuse? Oh yeah, engineering…

  • avatar
    John Horner

    Honda’s future success does not depend upon re-energizing interest of the enthusiast base. In fact, the ricer’s fascination with Hondas of years gone by probably did damage to Honda USA’s bread and butter business of selling well made cars at agressive prices to practical minded customers.

    “… 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.”

    Bzzzt, wrong. The Civic is generally Honda’s best seller and the CRV alone outsells all of the Acura models. Yes, Pilot and Odyssey sales fell off the cliff during the $4 gas era … but so did every large vehicle. Honda is the least dependent upon large vehicle production of any of the major makers. (I don’t consider Nissan or Mazda major makers.)

    The real story is that Honda is responding aggressively to a highly turbulent market. They recognize danger when they see it and are responding aggressively. If only the US based auto makers had a similar culture!

    Compared to the troubles other car makers are facing Honda is doing pretty well. Toyota, for example, has a much more screwed up product portfolio with way too many models based on too many platforms. Honda builds its entire auto and truck product line off four platforms, and there is plenty of sharing even between the platforms. The upcoming Insight might count as a fifth platform, but I bet it shares as much as possible with the Fit, Civic and Accord.

    “buy who is making cars that size anymore anyways? Mini?”

    Park an original Mini next to the modern version and you will be amazed how much it has grown.

  • avatar
    Martin Schwoerer

    The new Insight may be a Prius copy, but it will be a copy of the Prius at a considerably lower price. And that’s nothing to throw your shoes at.

    I saw the Insight in Paris in October, it looked good, the Honda people were brimming with confidence, and I think it will be a hit (all things being equal, in particular that no car is selling really well these days).

  • avatar
    jerry weber

    I take an entirely different view of Honda’s troubles. First, I don’t think they could have planned their way out of this downturn. Think about the 1930’s. Many car companies didn’t weather nearly 10 years of poor total sales volumes. The best back then GM, Ford, & chrysler also suffered. You can’t sell cars to people who are worried about their jobs, housing, and putting food on the table. I don’t know how long this recession goes, but Honda will be a survivor when it is over and there was nothing they could have done to change the downturn. America must soak up: too many homes, too much credit debt, too high a life style for people’s income, and finally too many cars (including companies, models, and the amount individuals own.) A better scenario would be who besides honda and toyota will be left to sell here in America when all of this finally goes away? One final postscript, the good times didn’t role after the great deprression until after WWII and the huge boom coupled with a pent up demand of no cars for four years all chipped in to make the recovery.

  • avatar
    jaje

    Analyzing Honda brings up some big weaknesses yet some very important differentiators that’ll be the reason why they survive this global recession and come out a stronger company (compared to their peers).

    Weaknesses:
    – NA is Honda’s largest volume market and profit center. It sales have been falling and the dollar depreciating against the Yen.
    – Japan’s car market has well past matured and they are contracting where several MFGRs will have to disappear. It seems Mitsubishi is on their last leg.
    – Diversification: Outside of mobility / engines Honda has little diversification nor a huge parent company that can help reinvest (such as Subaru has with Fuji).
    – Target for acquisition: We all know that back in the early 90’s Honda was a major target of GM and Ford. Honda’s financial situation was weakened and they did the same thing as they are doing now – pull out of F1 and cut back on major expenses.

    Strengths:
    – Image: public perception is as important as reality. This brings potential customer in the door to buy cars.
    – Flexibility / Scalability: Very few auto MFGRs have Honda’s flexibility that can switch over to an entire new platform in an hours time. Most take 2-3 weeks to retool – some even months to switch to another platform.
    – Worker Dedication: Most Honda employees believe in the company and it in its employees. This creates a level of trust, openness and respect – making any negotiations much easier.
    – Supplier Relationships: Honda constantly helps its suppliers by helping them cut costs and evolve rather than treat them as
    – Management: We give little credit to their leaders – all how make substantially less than the D2.8 “leaders”. All of their upper management are groomed insiders and many outsiders with backgrounds in engineering. Engineers run this company which means you do not get many poorly designed products that you dump on our core customers (those who will buy from you no matter what).

  • avatar
    bmmr

    There are at least two major motorcycle events (Honda sponsored) that have been canceled for 2009

    The Honda Hoot and the Honda Homecoming in Marysville Ohio due to economic uncertainty.

    http://www.hondahoot.com/index.aspx?bhcp=1

  • avatar
    fincar1

    Honda sees changes in market condition, and makes changes to adapt itself. How is this a bad thing?

  • avatar

    Let me start by thanking everybody who read and commented on this article, which is my TTAC debut. I’d like to respond to a few of the points made above:

    a) I never said the Civic was *heavier* than the 1 Series, I said it was *bigger*, which it is. It’s lighter than a 1er; it had better be, since it’s a tranverse-engined four-cylinder with thin doors and small wheels.

    b) The Accord’s curb weight in EX V-6 trim is 3609 pounds. I’ll take a rap on the knuckles for hyperbole there by saying it was close to two tons; still, the car is more than twenty percent heavier than it was in 1997.

    c) I’ll stand by my assertion that the United States represents the heart of Honda’s business. Crack open the annual report and read the numbers. By the numbers, Honda is basically a Chinese scooter company, selling something like eight million small-capacity two-wheel vehicles in Asia, but it takes fifteen Chinese scooters to equal one Pilot in revenue.

    d) John Horner states that the Civic is usually the best-selling Honda model. I am not aware of a single model year since 1978 where this was the case, with the exception of 2008. In 2007, the Accord handily outsold the Civic, and every year for which I find data previous to 2007 has the same results.

    To be honest, I’m a little saddened at all the comments to the effect of, “Getting out of F1/canceling the NSX/ignoring the enthusiast is the right thing to do for business reasons.” Assuming none of us are Honda shareholders, why would we support those decisions, merely because they are profitable? Do you really want to live in a world where every car is designed, built, and sold for the most pragmatic reasons possible? That’s a world where only Porsche and Ferrari build sporting vehicles, because I’m not aware of any other company which really makes money on its enthusiast-centric product.

    There was a time when every Honda had the soul of an enthusiast car. To see what I mean, drive a 1977 Cutlass, then drive a 1977 Accord… and then drive a 2008 Accord and tell me which car feels like the spiritual ancestor of the modern product.

  • avatar
    buzzliteyear

    One thing that concerns me somewhat about Honda is their slow adoption of state-of-the-art technologies, such as direct fuel injection and 6+ speed transmissions.

    The fact that the Honda fleet is one of the most fuel-efficient is more a testament to the lack of large trucks/SUVs/V8 engines in it, not so much to superior Honda engineering.

    There’s a certain bipolar aspect to this, because the FCX Clarity is an amazing piece of engineering that shows what Honda can do if they put their corporate mind to it. But the current ‘bread-and-butter’ cars (Civic/Accord/etc.) are running on powertrains that are now several years old in their basic technology.

    The economic meltdown probably means that Honda will stretch out the current designs even further.

  • avatar
    no_slushbox

    If building an amazing sports car and spending billions on motorsports was the key to sucess then GM would not be bankrupt.

    I wish Honda would make Acura pure RWD. I wish Honda would build a successor to the Beat and bring it to the US market. But that’s what would be good for me, not Honda.

    In every size category Honda makes the best driving, best built front wheel drive car on the market.

    They have firmly established that reputation with the American public, and they still live up to it.

    If anything they need to catch up with transmissions; they should offer 6 speed automatics and manuals throughout the lineup.

    The manual transmission Fit was designed to be somewhat of a modern CRX, if Honda used low resistance tires, taller gearing and some aerodynamic tweaks the Fit could run circles around the Cobalt XFE.

    Hell, even if they just put a tall 6th gear on the sport Fit it could probably out do the XFE.

    Still, with gas under $2 a gallon it was probably a wise move by Honda to make the Fit more sporting than fuel efficient, and even in sport trim the Fit gets much better mileage than the Aveo that is supposed to be in its class.

  • avatar
    John Horner

    Jack is right, I should have said that the Civic is currently Honda’s best seller rather than usually. It has just about always, however, outsold the Odyssey, Acura TL and Pilot mentioned in the original article as core products while the Civic and CRV were left out.

    I’m an auto enthusiast, but not from the hooning/racing/horsepower-addicted part of the clan. I thoroughly enjoy driving my ’06 TSX, but the extra performance envelope a Porsche or Corvette offers wouldn’t tempt me at all.

    It is true that the US market is core to Honda’s current business. What I disagree with is the notion that looking after that core business requires a renewed emphasis on enthusiasts. Mazda is trying to go that way (Zoom Zoom!), and yet Mazda remains a bit player both at home and in the US. Mitsubishi, Subaru and Mazda are all in a far worse strategic position than Honda is. I wouldn’t be surprised to see Mitsubishi exit the car business completely (like Isuzu did), Subaru to end up a minor division of Toyota and Mazda to keep bumbling along thanks to its connection to Ford. Pull the Ford plug and Mazda goes down the drain straight away.

    Nissan is in the most precarious position of Japan’s big three. They nearly collapsed before Renault stepped in, and Carmageddon may yet take it down.

  • avatar
    KalapanaBlack

    Quick thought: is Honda still planning to launch a V8 sometime in the next decade? Talk about a dumb thing to do.

    Nobody’s perfect, it seems.

    As for the disappointment in the business-first comments, I posit this. If a company makes bad business decisions in order to build enthusiast-first models, and loses money to the point where they can no longer operate, because their cars are desirable to a few die-hard fans but not to the public at large, how long do you think that company will be around to offer anything – “interesting” or not?

    Not long.

  • avatar
    Bunter1

    Apparently it has become a trifle dull for people to try and make a case that Toyota isn’t as good as people think so a new windmill needs tilting at?

    The Fit mpg gag is a clear miss. Hard to find a actual road test where they can flog it under 30 mpg. And flog it they do, for the Fit’s handling probably invites harder driving than any other subcompact.

    Can’t recall seeing a Focus test yeild above 27-28 mpg. Not in the same league in the real world.

    Lobalt? Puhleeze. Typically 23-25 mpg in tests (even the XFE) and doubt any tester feels the remotest temptation to drive those piglets hard (SS excepted). CR got a 34 mpg average out of their Fit MT(39 hwy, 32 av/43 hwy for AT), interestingly 34 mpg is what their last Lobalt got on the hwy (24 av). Different class entirely.

    Honda built that car to deliver for the customer on the road, not the gov’s treadmill. Some other companies should consider that strategy.

    Remember, EPA mileage is run in a lab and like the “Pirate Code” it’s more of a “guideline”.
    It usually a safe bet that if you want useless statistics…ask the government.

    Cheerio,

    Bunter

  • avatar

    La plus belle des ruses du diable est de vous persuader qu’il n’existe pas.

  • avatar
    porschespeed

    To be honest, I’m a little saddened at all the comments to the effect of, “Getting out of F1/canceling the NSX/ignoring the enthusiast is the right thing to do for business reasons.” Assuming none of us are Honda shareholders, why would we support those decisions, merely because they are profitable? Do you really want to live in a world where every car is designed, built, and sold for the most pragmatic reasons possible? That’s a world where only Porsche and Ferrari build sporting vehicles, because I’m not aware of any other company which really makes money on its enthusiast-centric product.

    Jack,

    If completely pragmatic cars were the inevitable result of basically eliminating corporate racing support, then I too would be more sad.

    But history shows that not to be the case. If there ever was a demonstrable effectiveness for ‘win sunday, sell monday’, it existed when the race product had some plausible link between the car on the track and the car on the showroom floor.

    If anything, we might very well see some of that DNA connection return. There will still be skunkworks/on the sly factory support.

    I love racing, and racecars. But not enough to say damn the torpedos. It hasn’t worked for GM. As an enthusiast, I would hate to see a good company waste money on something that shows no ROI, especially looking down the barrel of a nasty economic cannon.

  • avatar
    Dave M.

    Honda hired Bangle’s cousin to design or something. IMO the only 4 vehicles with decent lines (inside and out)in the entire Honda/Acura line up are the Accord coupe, the CR-V, the Fit and the S2000.

    Talk about a screw up, Acura’s new direction is absolutely disgusting. And an RSX replacement is still sorely needed, even if it is a thinly disguised Civic hatchback… just leave out the idiot IP and Barbie-Jeep sized steering wheel. Oh and leave off the cheese-grater/buck tooth/stupid cousin from the country face.

  • avatar

    Honda is an extremely frugal and efficient company (anybody who’s done business knows this). It is against their very charter to fly in the face of economic adversity to run headlong into the wall buy spending recklessly (F1) and pushing vehicles that aren’t going to sell (NSX… for now at least). Posting a loss is not an option. Whereas Toyota will (although unwillingly) take a loss this year, Honda will do anything possible to avoid that plight. It’s in their DNA.

    Yes they are nimble, yes they are agile – but that will also allow them to redirect their efforts when economic conditions improve. I would not view their program cuts as indicators of demise, but instead of economic conservatism. It’s the Honda Way.

  • avatar
    Pch101

    I’m a little saddened at all the comments to the effect of, “Getting out of F1/canceling the NSX/ignoring the enthusiast is the right thing to do for business reasons.”

    Honda does a pretty decent job of selling cars that people want to buy. They are steadily building share by creating a loyal base of customers, who sell the virtues of the brand to their friends and family, which leads to more sales.

    That’s what a company is supposed to do. I wouldn’t be so quick to dismiss the enthusiasm of its customers, even if that isn’t your kind of enthusiasm. Those people are enthusiastic enough to spend their money, so they deserve to get something that they want.

    Also, I find the comparisons to the 70’s to be a bit nostalgic and out of context. Back then, you had a choice between gas-guzzling wallowing armchairs on wheels, and little nimble light compacts.

    Now, even the big domestics wallow a lot less than they used to (still too much, but not quite as badly), while the appetite for safety and creature comforts, such as power accessories, has grown for buyers in all classes. These features add weight to a vehicle, making a modern 1,900 pound successor to the original Civic impossible in today’s market, at least in the US, and the gap in road feel between the smaller and larger cars should be smaller.

    I don’t think that we’ve ever had better mainstream production cars than we do today. Except perhaps for exterior styling, they are superior in just about every way. I do wish that we would figure out how to pull a bit of weight from them…that is, until I look at the SUV’s over in the next lane and remember that I deserve to have a fighting chance if one of them decides to collide with me.

  • avatar
    no_slushbox

    Regarding weight:

    The 1989 Honda Civic Si Hatchback:

    2161 Pounds
    108 HP
    20.01 Pounds/HP
    28/33 City/Hwy MPG
    No ABS
    No Air Bags
    Manual Windows
    Manual Locks
    Not Tested Crash Rating (it would be scary)

    The 2009 Honda Civic DX Coupe:

    2588 Pounds
    140 HP
    18.49 Pounds/HP
    26/34 City/Hwy MPG
    ABS
    Six Air Bags
    5 Star Front Driver and Passenger Crash Rating
    4 Star Front Passenger Side Impact Crash Rating
    5 Star Rear Passenger Side Impact Crash Rating
    Power Windows
    Power Locks
    (No AC or Radio, but I’m sure the 1989 Civic did not have standard air, and the radio is de minimus)

    Not too bad for 427 pounds.

    By the way, the lightest car currently on the US market is made out of aluminum that is glued and rivited together because it is too thin to weld, has paper thin plastic body panels, two seats, no carpet or sound deadener, and only front air bags.

    It is the Lotus Elise and weighs 1984 pounds.

    It costs 3 times as much as a new Civic at $46,270.

    It came very close to using a Honda engine, but Toyota was willing to loose money to get the contract.

    http://autos.msn.com/research/compare/exterior.aspx?c=0&n=3&i=0&ph1=t0&ph2=t0&tb=0&dt=0&v=t11331&v=t108213&v=t106966

  • avatar
    jaje

    Jack – Do you run a business? Do you understand that then times are lean so must you be? If your revenue and profit drops substantially would you consider cutting back on very expensive endeavors ($300M a year kind)?

    You are completely missing the point – and I see some kind of bias in some comments. Honda makes some pretty good cars. Yes they use thinner sheet metal but so does all their competition including D2.8 and VW. Honda does not compete the Civic to the BMW and never will. Why not compare the Civic to its natural competition and note weight of the wheels and thickness of sheet metal.

    B/c Honda is pulling back the reigns doesn’t mean that the company is failing – do a business case analysis of GM and you’ll see what failure of a business model and poor leadership is. Honda is simply saving itself money in case this recession is long or gets even worse.

    Honda is also the only company to have all autos they sold get best recommendation in crash safety in all categories. (the 2001 Civic coupe with SAB was the first ever compact car to get all 5 stars crash safety).

    The comment that outside of NA auto sales Honda is a Chinese scooter maker is absolutely ridiculous. North America by far is their biggest market with about 50% auto sales – but in reality all the other major auto makers have a huge reliance on NA (though not as much as Honda). Let’s look at how efficient these models are?: Accord, Civic, Pilot, CR-V, Fit, Odyssey, TL, MDX are the market leader or the highest and likely the retail leaders in all categories as Honda sells less than 1% to fleets – the lowest of almost any MFGR. 15% of Camrys and Corollas go to fleets. You want to have a successful business – make 10 different models to equal the same total sales volume as someone who has to sell 15-20 different models.

    Onto the Motorcycle side. Motorcycles are the prime and entry level items for most other countries – where you create customers who will buy your cars when they can afford them.

    Power Equipment and Other realms and new products: Honda has some limited diversification but they are on the cutting edge – new solar panel plant online that uses 50% less energy than current technology to produce. The HondaJet that gets better efficiency than all other VLJs on the market. Honda is also close to creating a commercial small robot to assist humans.

    Financial Services side is booming for Honda – why? Well they turned down poor credit customers b/c they were risky, whereas much of the D2.8 sold anything to anyone who had a pulse and are now paying for it. As I noted Honda’s fleet sales are almost nonexistent compared to other major auto MFGRs so they on average make more profit per vehicle. When sales slow down in a recession – everyone suffers and Honda is no different. Honda just hasn’t suffered as much.

    In the end leaving F1 maybe smart as it is changing due to Weekend at Bernie’s dictatorship. I’m sure we’ll be seeing others leaving soon as the MFGRs have been discussing creating their own rival series.

    In the end Honda is not perfect – but they are in a better position than their D2.8 counterparts and even than Toyota (will post first annual loss in company history), Nissan, Mazda, etc.

  • avatar
    gelatin

    honda isn’t in trouble, the culture of ‘performance’ driving is in trouble. bad economic times force people to live within their means. the previous bubble allowed consumers to indulge in the most flamboyant displays of consumption. insecure fashionistas bought chanel purses complemented with oversized hollywood sunglasses. their male counterparts overcompensated with overblown performance cars. we never needed this stuff, and now we cannot afford them.

    that isn’t to say the nsx, or its stillborn descendant isn’t a great piece of engineering. but these things are subordinate to little things, like food and other living expenses.

  • avatar

    Hi jaje,

    Thanks for your comments. You state that,

    “The comment that outside of NA auto sales Honda is a Chinese scooter maker is absolutely ridiculous. North America by far is their biggest market with about 50% auto sales.”

    Let’s take a look at the non-Chinese numbers from Honda’s 2007 Annual Report. In fiscal 2007, Honda posted the following sales numbers:

    India: 3,930,000 units, primarily bikes
    Indonesia: 2,340,000 units, primarily bikes
    Brazil, 1,300,000 units, 95% bikes
    United States: 2,005,000 units, 80% CARS
    Japan: 1,100,000 units, split 75/25 bike/car
    Europe: 644,000 units, split 50/50 car bike

    Now take a look at the numbers here:

    http://world.honda.com/investors/annualreport/2007/03.html

    Don’t feel like clicking? Here’s a summary. Honda’s operating income is split about 85/15 car/motorcycle. As you note, North America accounts for half the auto sales… combine that with the motorcycle and power products market and we see that NA is responsible for more than half of Honda’s operating income. But there’s a problem. The vast majority of Honda’s Asian production occurs through affiliates, as you’ll see if you read the whole report. If we boil off the stuff that Honda doesn’t own, or doesn’t own any more than half of, we end up with the iceberg analogy again.

    Without North American production and sales, Honda wouldn’t sell more than half a million fully Honda-produced automobiles a year. Thirty years ago, it was perfectly possible to profitably operate a car company at that level. What about now?

    As for being biased for or against Honda, I’ve had my boots on the ground in four major Honda assembly plants, I’ve owned a few Honda motorcycles, and I’m racing a Honda next year. At one point in my life I was quite a rabid Honda fan, going so far as to browbeat my mother into buying a 1983 Civic 1500S in my youth. I’m also pleased to race heads-up against the Honda quasi-factory effort in NASA, driving with the engineers and production people who represent the heart and soul of Honda’s North American plants. They’re great people — and left to themselves they’d make more great cars.

  • avatar
    bleach

    Nice article Jack and an interesting topic. I had to go back and read it again after reading the comments to make sure folks were commenting on the same article I read. Outside of the title, it doesn’t sound all that critical of Honda. It just points out Honda’s greater reliance on the US market in respect to its Japanese competitors. I also think the statements on motorsports and sporting models is dead on. Basically Honda’s sporting efforts are inconsistent. They don’t have a perpetual Corvette type program that you always know will be there. Will that be a problem for its brand? Probably not, but competing on reliability and value may leave it competing in a dismal and saturated market.

  • avatar
    Nicholas Weaver

    Also, Honda Civic SI sedan, 2009:

    200 hp
    MSRP $23K
    Weight, 2950 lbs

    21/29 MPG (please note, EPA 2008+ is far lower than <2007 measurements)

    That Civic Si would be $13K in 1989 dollars.

    Hardly seems like a betrayal: The new SI is far more powerful, FAR FAR FAR more featured, and costs about the same in constant dollars.

    Yes, Honda is dependent on the north american market slightly more than other car companies, but not to a disastrous amount, and sales dropoffs in Europe and Japan seem about equal to the NA bloodbath too.

    Honda WILL have a few rough years ahead, but every car maker will.

  • avatar
    jaje

    I think one of the major points missed is that many Asian/European markets have a much higher sales of cycles which is the larger market share (sell more cycles than cars). Honda is one of the biggest volume sellers there – versus selling only cars to a much smaller market share.

    Being a cycle MFGR IMO gives Honda a leg up on most of their competition in these markets – where 2 wheel transpo is entry level – meaning “if” they move up to buying a car – Honda is a well known and trusted name.

    The argument that affiliates don’t count – when Honda helped invest 50% in these joint ventures or would be forbidden from entering those markets (India and China are very well known for their protectionist measures – leading most to partner – look at Buick, Toyota, etc. – 80% of cars sold in China are made under a joint venture with a Chinese MFGR). What is happening is that they are now taking a major knowledge transfer from these JVs and now using it to create their own companies without care of copyrights, patents, etc.

    Also, as for a fellow racer (I raced in ITC and Honda Challenge the past couple of years) – now moving into NASA’s 944 Spec / PCA SP1 b/c I want more competition.

  • avatar
    Robert Schwartz

    “Assuming none of us are Honda shareholders, why would we support those decisions, merely because they are profitable?”

    Because we want them to stay in business. Honda has my complete respect for being very good businessmen. If we are going to have an automobile industry in this country, the players are going to have to be a lot more like Honda and a lot less like GM.

  • avatar

    Honda is staying true to form by dumping likely losers (NSX mess) and money holes (F1), while promoting a few gems (Fit, Insight, CR-Z). Of course they’re in full conservation mode; who wouldn’t be? I’m a Honda enthusiast and certainly not a fan of some of their decisions, but overall, I believe Honda is playing it smart.

    I see Honda as a well designed and maintained ship, heading into dangerous waters, with an experienced, confident crew on deck. Of all the world’s automakers, is there another in better shape to weather this storm?

    Nope.

  • avatar
    wardenr

    Mr. Baruth:

    I genuinely appreciate your essay, along with all the reader commentary, about Honda. In the background, I see the ghost of founder Soichiro Honda, grinning with deep pride, as he reads each word.

    He imbued the company with his “take no prisoners,”take no shit,” Shogun Warrior mentality. Admiring and respecting the crusty, old, brilliant, gutsy SOB as much as I always will, I hope he is among the first I get to meet if/when I arrive at the Pearly Gates.

    Having grown up on Honda motorcycles in the 1960s, I marveled at their jewel-like precision. Unlike the FOOLS who run “Detroit,” I knew Honda’s near-perfect two-wheel creations would eventuate into four-wheel machinery of similar/superior caliber.

    The Camry and the Accord have become the “de facto” benchmarks by which every other American sedan is measured. This did not happen overnight, and it certainly did not happen by accident.

    One of the things they teach one in the graduate Marketing course is about the brilliance of Japanese marketing. Utilizing a “tier-by-tier” strategy, every move must be positive, and every product must be a winner. The Japanese do not have the luxury of making Detroit’s countless, famous, expensive mistakes.

    I OWN two (2) Accords; a 1986 Hatchback LX-i (five-speed), which I purchased some 15+ years ago. And I recently acquired a 2002 Accord Coupe LX V-6. The performance and personalities of these cars are as different as day and night, black and white. But the soul of the founder, and the brilliance of the men and women who designed these incredible machines, burns brightly in my mind, every time I hit the ignition switch.

    Being business sensible, Honda has to withdraw from F1 and (temporarily) shelve the planned NSX. A good Shogun Warrior knows when survival takes precedence over wish and desire.

    A V-8/V-10 is necessary for Honda/Acura to create upscale products to compete with Mercedes, BMW, and Lexus. There is no replacement for displacement…and more cylinders.

    While “Detroit” soon becomes a servant of the U.S. government and Wall Street, my company…HONDA…quietly moves FORWARD!

    Shogun Warriors (and Ninjas) accept nothing other than SUCCESS!

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