Honda Cuts U.S. Production and Salaries
Published: March 31st, 2009
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Honda announced March 31 that it would cut production in North American by 204,000 units, aiming their yearly output at 1.25 million. For the first time ever, Honda is also slashing salaries. Hourly employees and executives all the way to the top get a trim; and bonuses get bounced. Honda’s US sales dipped 7.9% in 2008 (compared to 2007) but the American market overall fell 18%. Honda wasn’t in terrible shape and seemed to have a good product mix. Then the first quarter spreadsheets began to fill in—a 33% drop in sales is a plunge of a different color. Carving will take place at all North American facilities.
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The F1 team previously known as Honda just took the top two spots with a pole to checkered win in the first race of the season. So it appears they might have pulled the plug on their racing team a tad too quickly. Saving $300 million dollars sounds like a good plan in this economy, but it must be a tough pill to swallow to see your car dominate using a competitor's engine. From a business sense I've always thought its better to cut pay and keep people around, this way your staff is in place and good-to-go when (if?) the economy rebounds. Laying off people is a costly proposition: you pay tons in severance packages and then have a long rehiring/training period when your trying to get back up to speed ahead of your rivals.
As someone commented on DRN Imagine the nerve of that - guy thinking he can use common sense, logic and experience to run his company just because he is the CEO. Not all decisions made by Honda have had this level of objective thought. Take their hybrid program for instance. First, they put out a 2-seater vehicle (Insight) where the share of this segment is barely 2% of Worldwide sales. Discontinued after low sales. Second, they came out with a hybrid version of the V6 Accord whose sales were ordinarily 10% of the Accord's 400,000 US sales. Introduced December 2005 and discontinued June 2007 again owing to low sales. -JMII ex-Honda team wins. But not here in NA. See that's the problem. NA is Honda's most important market but F1 management in their infinite wisdom somehow decides not to race in NA. I think I am safe in saying that those wins are completely under the radar here, and have no halo effect for america that is in any way relevant to their auto sales. All that happened is that Honda just saved themselves $500 million. I half expect Toyota to exit the same shortly. With the demise of GM and Chrysler as players, the next version of The Three Tenors, Honda, Ford and Toyota may spark a whole lot of interest competing at NASCAR. Or perhaps even, now that the time is right, go downmarket with an alternative race series pitching the Civic Si against similarly equipped competition. You know, with cars carrying name plates that most people buy.