Honda's New Passport Arrives at an Opportune Time

hondas new passport arrives at an opportune time

No, not just because American buyers open their wallets for anyone hawking a high-riding vehicle; rather, because an influx of cash would help stabilize Honda’s balance sheet.

The automaker’s global profits took a 40 percent haircut in the fiscal quarter ending December 31, with net income falling 71 percent in the same time frame. North America wasn’t a fiscal fortress, either. While a new crossover that straddles segment boundaries isn’t the cure for all that ails Honda, it’s anything but hindrance.

The blows impacting Honda were thrown from many quarters. Warranty costs and sales expenses, combined with shrinking margins and falling car sales, hurt the company in the past quarter, Automotive News reports. A rising yen erased potential profit, too, while a water-damaged plant in Mexico reduced the North American supply of Fit subcompacts and engines bound for the Honda Insight (itself built in Indiana).

Operating profit fell 53 percent in North America last quarter, and the automaker now expects to take a 34 percent hit to its global net income by the end of the fiscal year.

While Executive Vice President Seiji Kuraishi claimed during an earnings call that his company doled out steep incentives to sell down the outgoing CR-V, one model alone probably doesn’t account for the projected 21 percent increase in per-vehicle incentive spending in January 2019. Data from ALG shows Honda with the steepest year-over-year increase in incentivization. Still, this hood cash ($2,132) is low for the industry, and represents a decrease of 2.4 percent from the previous month.

What Honda needs is a calmer global landscape with no major hiccups, and strong-selling models. The reborn Passport seen recently on these digital pages may not excite the senses, but looks built to sell. Basically a slightly shortened Pilot with greater off-road chops, the Passport is a two-row crossover designed to gobble up buyers in a hazy middle ground while offending no one with its styling. Can we call that sub-segment “lower midsize”?

Though Honda claims the Passport won’t hit dealers until Monday, some 126 Passports can already be found on the company’s January sales sheet. Overall, the automaker’s sales rose 1.5 percent, year over year, in January, with the Honda brand recording a 0.8 percent gain. Acura saw a 9.6 percent volume increase, helped along by strong RDX sales (which now eclipse the flat-selling MDX midsizer).

Interestingly, the MDX sold exactly as many units in January as it did a year prior: 2,968 vehicles. The RDX, however, saw its popularity grow by 40.9 percent.

[Image: Honda]

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8 of 56 comments
  • Jerome10 Jerome10 on Feb 03, 2019

    The article mentioned warranty costs. If so, what are they? Bad ZF 9 speeds? Turbo motors?

    • See 5 previous
    • Psychoboy Psychoboy on Feb 04, 2019

      @gtem I'm sure Honda gets their money back from Takata (or whoever is managing their current concerns), but Honda still has to pay the dealerships to do the work in the meantime. Not that Honda has a choice in the matter, but that's probably a fair chunk of cash sitting in the accounts payable tray.

  • SuperCarEnthusiast SuperCarEnthusiast on Feb 04, 2019

    Honda dealers are taking orders at MSRP only. I will wait a year or two to see how the Passport shakes out! Not wild about the exterior looks either. It is suppose to be designed in California and took a lot of work to achieve this final design too. That is so hard to believe that to be true after look at it! LOL!

  • FreedMike That wagon is yummy.
  • Syke Thanks, somehow I missed that.
  • 285exp I am quite sure that it is a complete coincidence that they have announced a $7k price increase the same week that the current administration has passed legislation extending the $7k tax credit that was set to expire. Yep, not at all related.
  • Syke Is it possible to switch the pure EV drive on and off? Given the wonderful throttle response of an EV, I could see the desirability of this for a serious off-roader. Run straight ICE to get to your off-roading site, switch over the EV drive during the off-road section, then back to ICE for the road trip back home.
  • ToolGuy Historical Perspective Moment:• First-gen Bronco debuted in MY1966• OJ Simpson Bronco chase was in 1994• 1966 to 1994 = 28 years• 1994 to now = 28 yearsFeel old yet?