Honda's New Passport Arrives at an Opportune Time

Steph Willems
by Steph Willems

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]

Steph Willems
Steph Willems

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  • Jerome10 Jerome10 on Feb 03, 2019

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

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    • 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!

  • Varezhka The biggest underlying issue of Mitsubishi Motors was that for most of its history the commercial vehicles division was where all the profit was being made, subsidizing the passenger vehicle division losses. Just like Isuzu.And because it was a runt of a giant conglomerate who mainly operated B2G and B2B, it never got the attention it needed to really succeed. So when Daimler came in early 2000s and took away the money making Mitsubishi-Fuso commercial division, it was screwed.Right now it's living off of its legacy user base in SE Asia, while its new parent Nissan is sucking away at its remaining engineering expertise in EV and kei cars. I'd love to see the upcoming US market Delica, so crossing fingers they will last that long.
  • ToolGuy A deep-dive of the TTAC Podcast Archives gleans some valuable insight here.
  • Tassos I heard the same clueless, bigoted BULLSHEET about the Chinese brands, 40 years ago about the Japanese Brands, and more recently about the Koreans.If the Japanese and the Koreans have succeeded in the US market, at the expense of losers such as Fiat, Alfa, Peugeot, and the Domestics,there is ZERO DOUBT in my mind, that if the Chinese want to succeed here, THEY WILL. No matter what one or two bigots do about it.PS try to distinguish between the hard working CHINESE PEOPLE and their GOVERNMENT once in your miserable lives.
  • 28-Cars-Later I guess Santa showed up with bales of cash for Mitsu this past Christmas.
  • Lou_BC I was looking at an extended warranty for my truck. The F&I guy was trying to sell me on the idea by telling me how his wife's Cadillac had 2 infotainment failures costing $4,600 dollars each and how it was very common in all of their products. These idiots can't build a reliable vehicle and they want me to trust them with the vehicle "taking over" for me.