All Things Must Pass: Honda Gets Ready For the Big Meltdown
Japanese car makers castworried glances at the thinning calendar: On September 30, Japan will discontinue their subsidies for environmentally friendly cars. That program had provided Japan with China-sized double-digit growth rates. All things must pass, and Japanese automakers are getting ready for a German sized Abwrackprämien-aftershock: Everybody is expecting a run on dealer lots through September and then: Bang. Other than in Germany, where people who never bought new traded in the jalopies for a cheap new car, in Japan there is a huge pull-forward effect. Automakers are preparing for the worst.
Honda has decided to loan roughly 400 employees to affiliated dealerships once demand for new cars will take the big plunge. Honda is obviously preparing for the worst. The workers are expected to help out the dealerships for three years, but longer stints are possible.
The employee loan program will only target dealerships run by Honda’s sales subsidiaries. Honda’s operates approximately 700 dealerships in Japan. There are another 1,500 independent Honda dealerships, they will get no loaners.
Says The Nikkei [sub]: “It is highly unusual for an automaker to loan so many employees to dealerships, since 400 people translate to about 7 percent of Honda’s 6,000-strong workforce. But the firm anticipates a major sales slump, forecasting new-car sales in Japan to fall as much as 30-40 percent in October and beyond.” Don’t ask me my car dealers need a beefed-up sales-force when business is down.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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The employee loan certainly seems counter intuitive. But, if you start with the assumption that Honda wouldn't fire those people, then it begins to make sense. More people on the demand creation (sales) side of the business and fewer allocated to the product creation (factory) side of things. The bigger news is that, at least in Japan, the Civic is going to become a hybrid power-train only vehicle next fall. http://www.marketwatch.com/story/honda-to-end-gas-civic-other-japan-models-report-2010-07-15?siteid=yhoof2
"Automakers are preparing for the worst." As they should be. While not making too much financial sense, transferring workers to work at the dealer can make sense for the company in the long run. 1. The sales slump will be felt all the way up through the ranks. There will be fewer jobs or hours available in marketing, PR, middle management, design, etc. 2. Transferring workers to the dealership level will give Honda employees valuable experience in learning customer preferences and true insight (pun not intended) into how the buyers are actually using their cars and what they are looking for in the future. 3. Overstocking the dealerships with employees will allow Honda to gain a reputation for TRUE personalized service and sales. Customers are more loyal when a company will take the time to work with them on finding the best car, vs. trying to shove a sale down their throat. You'll get a reputation for customer friendliness whether selling NEW or USED. Used cars are a huge profit source and certain people will always get tired of their rides after a few years and look for something new to them at least. It makes almost NO financial sense in the short run, but when taking the long view it could certainly give Honda a HUGE advantage and make people super loyal to them in the future.
This kind of preparation makes a lot of sense when compared to the US automakers plan of several years back to keep factory workers making cars in recessionary times rather than lay them off. We all know to well the result of that ridiculous plan which had to be honored as it was a concession granted to the United Auto Workers. Now there is a misnomer that rivals Military Intelligence .
I'm with the sexy spud. Overstocking dealerships with employees to allow them to communicate with the customers... both in terms of selling and learning customer preference... may just be a stroke of genius on Honda's part. They need it. Because here is a company that produces arguably superior automobiles that just can't get the market share it deserves for the amount of quality engineering that goes into its cars.