Honda promotes American managers in push to revive U.S. market

By ALAN OHNSMAN / Bloomberg News

Honda Motor Co. was the first Asian carmaker to build autos in the U.S. and is the most dependent on the market. Now it's also putting more non-Japanese in key roles.

North American Chief Operating Officer Tetsuo Iwamura becomes executive vice president April 1 and No. 2 to President Takanobu Ito. His new seven-member board will manage activities from product planning to production to sales in North America. Three members will be U.S. natives, the first time Americans have held such responsibility, including Erik Berkman to lead regional product development and design.

"Honda quite literally has become a North American car company headquartered in Tokyo, and that's a horrible combination," Jim Hall, principal of 2953 Analytics Inc., an auto consultant in Birmingham, said in a phone interview. "When your headquarters isn't in your most important and biggest-volume market, you become disconnected. We can see that's what's been happening to them. This is to reconnect headquarters with their most important market."

While Honda's U.S. problems have been less dramatic than those of Toyota Motor Corp., which recalled millions of vehicles for unintended acceleration, they've been significant. Even before last year's earthquake and tsunami cut supplies, core Honda cars such as the Civic and Accord were losing ground to Hyundai Motor Co. and Ford Motor Co. models that won praise for stylish looks and fuel economy.

Growing competition spurred Honda to offer U.S. incentives that were 87 percent of the industry average in this year's first two months, according to Woodcliff Lake, New Jersey-based Autodata Corp. In 2008, Honda's discounts were less than half the average.

'Out of Necessity'
"For too long they've lived in this cocoon of 'What we're doing is good enough,' " said Maryann Keller, principal of a self-named consulting firm in Stamford, Conn. "There's a recognition that that's no longer the case, so I think they are making these moves out of necessity."

For the first time, Honda's No. 2 executive will be based at the company's U.S. headquarters in Torrance, Calif., instead of Tokyo.

"Knowing the current competitive and complicated marketplace, rapid changes in customer needs, we think it's better to put more emphasis on the American side," Iwamura said in a March 12 interview. "Production and R&D, development facilities, those can be done by investing money. Localization of the people is one of the key issues."

Toyota Moves
Honda's revenue from sales of autos, motorcycles and power products in North America was 986.2 billion yen ($12.7 billion) in the quarter that ended Dec. 31, or 51 percent of its global total. While U.S. sales of Honda and Acura autos fell to 1.15 million units last year, which was still 38 percent of the company's worldwide volume.

Toyota, too, is giving more authority to North American executives, to improve development of products for the market and avoid a repeat of the 2009-10 recall crisis.

This month, Toyota promoted Jim Lentz to chief executive officer of its U.S. sales unit, the first time that job has gone to an American.

Asia's largest automaker last week said Steve St. Angelo, executive vice president for North American engineering and manufacturing, will oversee regional production as part of his duties on Toyota's North American management committee. Ray Tanguay, chairman of Toyota's Canadian unit, is responsible for North American quality issues. Lentz will oversee regional sales, marketing and product planning.

Honda's Revamping
Toyota President Akio Toyoda has said shifting more responsibility to local managers in North America is central to his goal of restoring customer satisfaction hurt by the recalls.

Honda's U.S. car and light truck sales slid 6.8 percent last year after natural disasters in Japan and Thailand curbed output of parts and vehicles. The company's redesigned Civic also flopped in tests by Consumer Reports, which recommended previous versions, a sign that the carmaker's ills extended beyond 2011's one-time events.

For decades, products created for the U.S. came from a "synergy effect" between Japanese and American engineers, Iwamura said. Now, American engineers making product decisions for U.S. customers is the best way to increase competitiveness, Iwamura said.

"That is one of the reasons we appointed Erik as the top man of R&D," he said. Berkman, who begins his new job April 1, was traveling in Japan and unavailable for an interview.

Honda's Targets
John Mendel, executive vice president of U.S. sales, is also joining Berkman on Honda's North American management board, as is Tom Shoupe, president of the company's Alabama plant.

Honda wants to rebound this year with a 24 percent U.S. sales gain. It has made some progress, boosting sales 11 percent in 2012's first two months, led by a 45 percent jump in Civic deliveries. The company plans to release a modified Civic later this year to address concerns raised by Consumer Reports, as well as a redesigned Accord.

The company's U.S., Canadian and Mexican plants may also set a production volume record, building about 1.8 million vehicles this year.

The automaker is completing more than $690 million of upgrades at U.S. plants and is also building an $800 million factory in Mexico to produce subcompact models such as the Fit.

In January, Honda said it planned to build its Acura NSX "supercar" in Ohio within about two years. The racing-style coupe will sell for more than $100,000. The site and cost of that project hasn't been announced.

Restoring Reputation
Restoring its reputation as an industry innovator, a legacy of founder Soichiro Honda, is a bigger challenge than boosting sales and production.

"It's not just the Koreans; everyone has gotten better," Keller said. "In terms of quality and features, it's a game of equals. It's just a lot harder for Toyota and Honda to stand out."

It may be years before Honda's changes in local management are effective, said Hall of 2953 Analytics.

"It's safe to say that if they keep going the way they were going, they were heading for a decline with other guys passing them and just doing better than they are," he said. In the U.S., "the question is whether they've caught their problems soon enough to not get passed by Hyundai-Kia."

Source;
http://www.detroitnews.com/article/20120325/AUTO0104/203250305/1148/auto01/Honda-promotes-American-managers-push-revive-U-S-market

Honda's automobile unit resumes operations in Thailand

Honda Automobile Thailand (HATC) has resumed production at its plant in Ayutthaya after severe floods halted operations in early October.

HATC, a subsidiary of Honda Motor, is the last of the Japanese automobile companies to resume production in Thailand after the floods.

Toyota Motor and Nissan Motor resumed production at the end of 2011.

The floods forced hundreds of Japanese companies to shut operations, adversely affecting their earnings expectations.

Earlier this year, Honda revised down its operating income forecast for the year ending on 31 March to 200bn yen ($2.4bn, £1.5bn) from a previous forecast of 270bn yen.

The Honda factory in Ayutthaya has the capacity to produce 240,000 units annually. Limited production

A Honda Motor spokeswoman said full production would resume at the HATC unit by the second week of April.

Currently production is at about 12% of capacity.

HATC was the only car maker whose factory was completely flooded.

Honda Motor said HATC is one of its most important production centres in the Asia and Oceania regions.

"Honda was totally committed to realising the earliest possible recovery. Honda will maintain the same positioning of HATC in the future and further promote business operations in Thailand," the company said.

Source;
http://www.bbc.co.uk/news/business-17508462

Don't call it a Comeback....

Honda Says Civic Has ‘Ammunition’ to Hang On as Top Compact Car

By Alan Ohnsman - Mar 13, 2012

Honda Motor Co.’s Civic, stung by critical reviews and tight U.S. supply in 2011, has outsold rival small cars and the company has enough “ammunition” to hold the spot, an executive said.

U.S. sales of Civic sedans and coupes rose 45 percent to 48,970 in the year’s first two months, ahead of Toyota Motor Corp.’s Corolla, a perennial challenger, and General Motors Co.’s Cruze. After supply disruptions last year, Honda now has enough North American capacity to make Civic the top-selling compact, even if that isn’t a target, said Tetsuo Iwamura, chief operating officer for North America.

“When competitors shoot at the Civic, we’ll have enough ammunition to shoot back,” Iwamura said in an interview this week at Honda’s U.S. headquarters in Torrance, California. “We don’t talk about No. 1 as a goal. Always we think about having very good acceptance and high customer satisfaction.”

The car that’s been the core of Honda’s U.S. business since 1973 hasn’t led compact sales since 2002. Civic trailed both Corolla and Cruze last year, according to Autodata Corp., a Woodcliff Lake, New Jersey researcher. A year after an earthquake and tsunami damaged Tokyo-based Honda’s parts supply base and engineering center in Japan, the carmaker has ratcheted up North American output of the model 69 percent to regain sales in the U.S., its biggest source of revenue.

Honda has gained 32 percent in Tokyo trading this year, recovering most of the drop last year, when the stock fell 27 percent. It last closed at 3,100 yen.

Output Increased
Honda made 84,678 Civics at plants in Canada and Indiana in the first months of the year, up from 50,056 in the same period a year ago. Production of all Honda and Acura cars and light trucks in North America jumped 36 percent to a record 301,564, according to the company.
Civic sales fell 15 percent last year to 221,235, the lowest since 1992. Along with parts-related production delays, the 2012 Civic LX sedan failed to receive the “recommended” status its predecessors had from Consumer Reports last August. The magazine faulted the car for a decline in interior quality, choppier ride and road noise.

Higher U.S. gasoline prices are benefiting Civic, and should buoy demand for at least another four months, said Jesse Toprak, industry analyst for TrueCar.com.

“It’s got a pretty good chance of being No. 1 this year, owing to the availability and the price point,” said Toprak, who is based in Santa Monica, California. “They are a bit lucky that the fuel prices are rising now as Civic continues to be viewed generally as more gas-efficient, and a safe choice.”

Fuel Price
The average price for a gallon of regular unleaded gasoline has increased 16 percent this year to $3.81 as of March 12, according to AAA, the largest U.S. motorist group. The Civic coupe has a starting price of $15,605 while the sedan’s price starts at $15,805, according to researcher Edmunds.com.

The outlook for Civic beyond July, when fuel prices may ease, will depend on updates of the car Honda plans to make to address some criticisms and competing models including Hyundai Motor Co.’s Elantra, Toprak said.

“Hyundai, in particular, has shown that it has the ability to replicate the kind of success seen with Honda and Toyota a generation ago,” he said.

Even with some unfavorable reviews for the current Civic, the car continues to attract the buyers competitors seek, said Alexander Edwards, president of the automotive division of Strategic Vision Inc., a San Diego-based consumer-research firm.

How Competitors Fare
Within the small-car segment, Civic is “still grabbing a younger, somewhat wealthier crowd,” Edwards said. The median age of its buyers is 45, compared with a segment average of between 49 and 50 years old, he said.

Volkswagen AG (VOW)’s Jetta draws a younger customer, with a median age of 41, because of its cheaper base price and Hyundai’s Elantra matches Civic with a median buyer age of 45, said Edwards, whose firm surveys 300,000 people a year for its automotive studies. Jetta’s starting price is $15,515, according to Edmunds.

The average Corolla buyer is 49, while the median age for customers of Ford Motor Co. (F)’s Focus is 53 and Chevrolet’s Cruze is 58, Edwards said.

GM’s data indicate that the average Cruze buyer is about 53, Jim Cain, a company spokesman, said in an interview.

Honda’s problems last year didn’t keep it from a top- ranking spot in terms of brand consideration, with 50 percent of people in the market for a new car saying they’d consider it, Edwards said, citing Strategic Vision data.

Inventory had a bigger impact on Civic sales last year than Consumer Reports’ review, said Iwamura, 60, who becomes Honda’s executive vice president on April 1 and will continue to lead North American operations.

“I accept their criticism very sincerely, but yet believe we’ll be able to make them once again a strong fan of the Civic,” he said.

Source;
http://www.bloomberg.com/news/print/2012-03-13/honda-plots-u-s-civic-rebound-buoyed-by-supply-abundance-gasoline-prices.html

Honda Statement on the first anniversary of the Great East Japan Earthquake

Thank you for your continuous understanding and support for Honda's activities.

One year has passed since the Great East Japan Earthquake that occurred on March 11, 2011. Honda would like to express its deepest sympathy and condolences to the victims of the disaster and our sincere hopes for the earliest possible reconstruction of the affected areas.

Despite the fact that we caused our customers some inconvenience during the past year due to the impact of the earthquake, such as delays in the delivery of some new products, we received a great outpouring of support and heartwarming messages from our friends and customers inside and outside of Japan. For this we are extremely grateful.

Honda would like to contribute to the earliest possible reconstruction of the affected areas by continuing our support activities and by dedicating ourselves to continue delivering products and services that please our customers.

In Europe, Honda have set challenging plans to achieve complete recovery as shown by the 2011 launch of the new Civic and seven all new motorcycle models. Furthermore, we are recruiting 500 new employees at our European manufacturing facility to support the Autumn launch of our all new European CR-V.

We appreciate your continuous support for our activities.

11 March, 2012
Ken Keir,
Executive Vice President, Honda Motor Europe

Source;
http://www.hondanews.eu/en/news/index.pmode/modul,detail,0,2204-DEFAULT,21,text,1/index.pmode

Honda Motor Europe President, Manabu Nishimae delivers Geneva Press Conference Speech

-New Civic with 1.6-litre i-DTEC diesel engine will deliver CO2 emissions of 95 g/km*
-NSX will be sold in Europe as a Honda
-New European CR-V prototype makes debut
-UK factory to double 2012 production volumes to 180,000

A full transcript of the speech follows:

Good morning, and welcome to Honda's media conference. I am very pleased to be here with you today.

Last year proved to be a very challenging year due to the natural disasters in Japan and in Thailand that impacted on our supply of new vehicles. Our ability to deliver cars to the customers who wanted them was restricted. Our Thai plant resumes full production within a month and all other production activity is fully restored. Whilst we must learn from recent history, we now look forward to what is an exciting future.

This is an important show for Honda. We are displaying products and technologies that will be at the heart of our growth plans for Europe. We are now entering a period of numerous product launches which will see Honda increase production volumes and increase sales.

In 2012, our UK factory will double production volumes to 180,000 units. In May, the New Civic assembly line will start a double shift and 500 new workers will join us.
Later in the year we start production of the New European CR-V.

The all New CR-V will be built in Europe and will be introduced in the Autumn with improved quality, performance, and enhanced fuel economy, along with new features unique for the European market. Today, we are showing a European CR-V prototype. We will display the production model at the Paris show in September.

Honda will also renew our entire European engine line-up, with a new engine series called Earth Dreams Technology. With these engines we aim to be Number 1 in fuel economy in each sector within 3 years.

The first engine from this series will be a new 1.6 litre diesel engine. Designed for Europe, it is expected to deliver 95 grammes per kilometre CO2 emissions and is the world's lightest engine in its class. It will be introduced on the New Civic and production starts at our UK factory at the end of this year.

Earth Dreams Technology engines will also deliver excellent performance characteristics. And at the summit of this range.... There is the new NSX.

This NSX Concept is powered by a mid-engine V6 ... and a new Sport Hybrid All-Wheel Drive system that comprises of 1 motor on the rear axle and 2 on the front. Supercar acceleration and outstanding efficiency will be the hallmarks of this revolutionary powertrain. The two motors in the front axle enable independent control of the left and right wheels to realize a ground-breaking "On-the-rail-cornering" experience. New NSX is set to define a new standard of Super Sport.
The US will launch new NSX with the Acura brand in 3 years. I can confirm the NSX will come to Europe....as a Honda.

NSX is the ultimate top-line Sports model, could we develop a smaller one? The EV-STER is another European premiere. This small sports EV Concept indicates the direction of how environmental technology can be incorporated with the pure joy of driving.

Our sporty plans are not limited to new models. A half century ago, Honda established the Suzuka circuit in Japan. It was the first racing track in Asia.

In October, at the Suzuka round, we plan to enter a European Civic into the FIA World Touring Car Championship. This celebrates the 50th anniversary of Suzuka Circuit. It also marks the 40th anniversary of Civic.

This racing Civic will be powered by Honda's new 1.6 direct injection turbo racing engine solely developed by Honda R&D. This is an important first step as we enhance the sportiness of Civic and the Honda brand.

Through Earth Dreams Technology, Honda will continue to minimise our environmental footprint so that we will all be able to enjoy sports driving for future generations and preserve Blue Skies for Our Children.

Thank you for your attention.

Source;
http://www.hondanews.eu/en/news/index.pmode/modul,detail,0,2198-DEFAULT,21,text,1/index.pmode

Honda Commits to Finding it's Way Back to Roots

By Chang-ran Kim And Ben Klayman, Reuters

The future of Honda Motor Co. may rest with a pair of contrarian Japanese car engineers working from a drab Tokyo suburb with a hotline to the boardroom. Their mission: just say no.

Honda's creative directors, Toshinobu Minami and Yoshinori Asahi, are out to kill any mediocre car designs rumbling down the pipeline. In short, they have been told to stop anything like the 2012 Civic, a cheapened redesign that prompted critics, consumers and rivals to wonder how Honda had so badly lost its way.

Inside Honda, in both Japan and the United States, that same question has also been asked with urgency.

Honda, many say, slipped into designing cars by committee in recent years and drifted away from the iconoclastic ambitions of its founder.

Honda had become boring.

"Somewhere along the way, we lost the ability to express ourselves more freely," Asahi said. "We have a lot of designers here, and when we ask ourselves, 'Which Honda car would we want to buy?' sometimes some of us draw a blank."

That's a startling admission at a company long praised for the quality and durability of its vehicles - a company that caught U.S. automakers flat-footed in the 1970s with inexpensive, fuel-efficient cars like the original Civic.

Touted four decades ago for its CVCC engine that boasted cleaner tailpipe emissions - as well as inspiring the Civic name - Honda has trailed with advances such as six-speed transmissions and direct fuel-injection systems.

In recent years, Honda's "car guys," the engineers that built the automotive upstart into a powerhouse, were overshadowed by the "bean counters," financial executives more willing to cut corners on vehicle content to shore up margins, insiders say.

That approach looks good on a spreadsheet, but it also carries the risk of a backlash. Consumers can turn on a debased version of a popular car and the resulting publicity can burn a brand - a lesson GM, Ford and Chrysler all learned the hard way in the slide to crisis in 2008.

Ironically, Detroit's willingness to settle for also-ran status in small-car quality created the opening for Honda in the 1970s and 1980s. Now, analysts and industry executives wonder whether Honda can rekindle the underdog ambition of founder Soichiro Honda.

Changes at Honda can't come soon enough after a terrible year. Slow to recover from the earthquake and tsunami in Japan a year ago, Honda's U.S. sales tumbled seven per cent in 2011. By contrast, Nissan bounced back with a 14 per cent sales gain to almost match Honda's market share. Meanwhile, Hyundai Motor Co. and its affiliate Kia Motors Corp. have overtaken Japanese automakers as the benchmark for value-for-money.

"Honda somehow managed to get very, very far away from their engineering discipline," AutoTrends Consulting president Joseph Phillippi said, adding it could take three years for Honda to show it has turned the corner in car development.

Honda's earnings remain supported by a strong finance arm and its leading motorcycle business. In addition, the automaker is taking steps to shift more production to North America to shore up profitability.

In another move that shows the importance Honda attaches to getting it right in the United States, the board last month promoted North America chief Tetsuo Iwamura to become the No. 2 global executive, the first time that job has been based outside Japan.

But behind the scenes, the battle for Honda's automotive soul is being played out in places like Asahi and Minami's sprawling third-floor studio in the Tokyo suburb of Wako. If the upscale Aoyama neighbourhood that houses Honda's headquarters can be likened to New York's Fifth Avenue, then Wako would be a dreary town in New Jersey.

Since September, when they were promoted to fix Honda's car designs, Asahi, 47, and Minami, 44, have been working from Wako with a mission to shake things up. Both worked in the early 1990s on the fourth-generation Accord, a bigger Honda that won praise for its simplicity and a near-indestructible fourcylinder engine.

Honda's creative duo now have a direct line to chief executive Takanobu Ito. Frustrated with the pace of decision-making at Honda, Ito has put himself in charge of Honda's car operations, splitting the core of the company into three units headed by engineers: the Acura brand, mid-sized vehicles and small cars.

Honda is rushing a redesigned Civic to market late this year, essentially a facelift to protect the image of a car that is key to both Honda's future and heritage.

Source;
http://www.calgaryherald.com/business/Honda+will+revamp+after+dent+from+Civic/6245829/story.html

Honda Surges Ahead

By: Ted Marzilli
After traveling long roads to get back on track with the public, both Ford and Toyota have struggled lately to establish themselves as the clear perception leader to potential car buyers in the US.

As a matter of fact, in the past month, Honda surged ahead of both of them, perhaps setting the stage for a comeback after a tough year of earthquakes, parts shortages and negative reviews for its new Civic edition. Their “Ferris Bueller” Super Bowl commercial may have arrived at just the right time.

Ford’s lengthy journey to one of the best perceived domestic auto brands was propelled by its well-liked product rollouts and homey ad campaigns starring cable TV series host Mike Rowe. But beginning last October, Ford’s perception actually began to backslide somewhat with consumers looking to purchase a new car, and that decline in perception actually accelerated since mid-January, coinciding with its most recent ad campaign debut.

In these ads which do not feature Rowe, just the mere act of buying a Ford vehicle merits a major press conference with reporters and photographers following the customers around.
Toyota made a long hard climb out of its early 2010 recall debacle with consumers, relentlessly marketing its vehicles despite its well-publicized troubles. However, the Japanese car maker hit a ceiling at the end of August 2011 which it has not been able to break through and regain its pre-recall footing. Even its recent “time machine baby” for the redesigned Camry ads appear not to have helped Toyota’s perception slump.

Ford, Toyota and Honda were measured with YouGov BrandIndex’s Index score, the company’s flagship measurement of brand health. The Index score is the average of several sub-scores, including quality, value, satisfaction, general impression, reputation and willingness to recommend. For this research, the results were filtered for consumers 18+ who will be making an auto purchase in the next six months.

YouGov BrandIndex measurement scores range from 100 to -100 and are compiled by subtracting negative feedback from positive. A zero score means equal positive and negative feedback.

On March 3, 2009, Ford’s Index score was 19, a few points higher than the average of the mid-market car sector. By the end of February last year, Ford’s score peaked at 42, putting a lot of space between it and the sector average of 15. Since mid-October, Ford has cooled down with car buyers and currently scores at 34 vs. a sector average of 19.

On January 22, 2010, the day before the bottom fell out for Toyota, its Index score was 47, making it one of the best regarded overall car brands, well ahead of the mid-market car sector average of 15. Four months later, Toyota had hit bottom at a score of 2. Since that time, Toyota slowly climbed its way back up, making it one of the biggest consumer perception gainers of 2011. Toyota hit 39 last August and even 40 in mid-January, but has been unable to get back to its early 2010 scores. Toyota currently stands at 32.

Honda had been trending downwards for over a year from March 2009 until June of 2010 when it went from a 51 to 33, before stabilizing. The brand has more recently trended positive and is currently at 39, outscoring both Ford and Toyota.

Source;
http://www.brandindex.com/article/honda-surges-ahead

Volkswagen parks in Honda's U.S. driveway

By Christiaan Hetzner
FRANKFURT Tue Feb 28, 2012 6:51am EST

(Reuters) - Volkswagen chief executive Martin Winterkorn squeezes his bulky frame behind the wheel of the new Honda Civic and takes out a tape measure - part of a forensic, and very public, inspection of the five-door compact at last September's Frankfurt car show.

"You were a role model for us for many years once," he tells an attendant Honda official. "Really."

They were the words of a man who knows Honda (7267.T) is on the ropes in the United States, and who fervently hopes he can eat the Japanese group's lunch in its biggest market.

The United States is home to nearly one in two Honda buyers, but its sales there fell 7 percent last year while overall U.S. vehicle sales expanded at a double-digit pace.

As a result, Honda's market share has tumbled 2 percentage points in two years to 8 percent in 2011. Volkswagen (VOWG_p.DE) is headed in the opposite direction, albeit from a low base.

Winterkorn wants to at least double the Volkswagen VW.L brand's 2.5 percent U.S. market share. Last year's sales performance was the best VW has managed there in three decades, with sales of Jettas and Passats up 44 percent and 83 percent respectively.

"The good news for Volkswagen is that brand loyalty is not what it used to be. Honda buyers started to flee to other brands like Hyundai because they wanted to express themselves and not be just one of the herd," said TrueCar analyst Jesse Toprak.

At an international level, VW has had its ups and downs since its birth in 1930s Germany, but it has come out of the 2008 crisis better than most.

While General Motors (GM.N) was pushed into a pre-packaged bankruptcy and Toyota (7203.T) endured its first ever operating loss, the Wolfsburg-based group has emerged as the world's second largest carmaker with the firepower to buy Peugeot (PEUP.PA), Fiat (FIA.MI) and Renault (RENA.PA) put together.

It made a record profit in 2011, but will need to prey on weaker rivals abroad to keep growing. That is because its core European market is set to shrink to its smallest in a decade, and carmakers are piling on costly, margin-corrosive incentives for free to compete for what remains.

VW's ultimate goal of becoming the largest, most profitable carmaker in the industry hinges on whether it can find lasting nourishment in the United States, where its pricey imports long ago forced the brand to feed off the scraps left over by others.

By shifting German car production to Tennessee and taking expensive features out of their over-engineered cars, a practice known as "de-contenting", VW has succeeded in luring customers back with affordable entry prices and sporty sedans like the Jetta - features that were once the hallmarks of Honda's Accords and Civics.

"Our biggest competitor here is Honda, since its customer base shares the same core values. We both focus on sportiness and versatility and have high demands when it comes to handling," VW's U.S. strategy chief, Rainer Michel told Reuters.

Toyota's no-frills customers do not buy a Camry to enjoy the ride, he said, while Hyundai buyers are attracted to the kind of trendy exterior designs which Honda and VW both eschew.

HUGE BULL'S-EYE
Honda, by contrast, has a pool of well-educated and more affluent U.S. car owners who tend to favour more subdued styling packaged into a fun ride.

Among its five biggest competitors, Honda boasts the lowest spending on incentives like cash rebates or free features and trim, according to auto-information website Edmunds.com.

It also abstains entirely from selling to fleets like Hertz rental agency. Fleet sales and incentives are both pressure valves many carmakers resort to when times are hard.

"We are not the flashy choice, we are the smart choice that informed customers make after weighing things like reliability, fuel economy, driving enjoyment and so on. This helps us keep a tight lid on incentives and preserve a high resale value for our owners," said American Honda spokesman Chris Martin.

"That also means that we have a huge bull's-eye painted on our back, though, since any other auto company would love to attract this kind of customer base."

But the chinks are starting to show in Honda's armour. It expects operating profit in the year to end-March 2012 to fall 65 percent to its lowest level in three years, prompting Moody's to downgrade the company's outlook to negative due partly to the tougher competition from predators like VW.

Earthquakes, tsunamis and floods in Japan and Thailand severely damaged its supply chain last year. Making matters worse, the latest Civic model has been panned by critics in the United States, forcing Honda to promise a costly facelift much earlier than planned.

"The Civic was for the longest time the torch bearer for what Honda was all about - compact cars with efficient four cylinder engines and very responsive chassis that give drivers a great feeling for the road," said Bill Visnic, an analyst and senior editor for Edmunds.com.

"That reputation has been slipping rather precipitously, though, ever since they began compromising to chase market share with cars getting bigger and the ride becoming softer."

AMERICAN HEARTLANDS
Meanwhile VW has one of the youngest customer bases - important for a brand's image - while spending even less than Honda on incentives - quick fixes that boost volumes but ultimately hurt demand over the long run as resale values fall.

As a result, the new Passat sedan spends half as long collecting dust on a dealer lot than the average U.S. vehicle.

"A lot of new VW buyers were Honda owners who no longer wanted to see 10 other exact same cars every time they came to a stop at the traffic light," said Chris Chaney, Vice President of consumer research group Strategic Vision.

According to his firm's surveys, Honda was the brand to surrender sales the most to VW last year. VW owners are more prone not just to feel better about driving their new cars but also to be more excited about them than Honda customers.

"There is no question that there are Honda owners who see Volkswagen as a step towards the prestige associated with German engineering," Chaney said.

With gasoline prices expected to climb, market researcher Art Spinella believes VW can also benefit from its strong range of fuel-efficient diesels, but warns a patchy dealer network, largely based in coastal areas, will continue to hold them back.

"Pump prices mean that car buyers will consider VW much more often, but for that to translate into actual sales they need good dealers, and here they are only strong in the slow-growth states in the Northeast," said Spinella, President of CNW.

In order to hit its sales target of 800,000 VW brand car sales by 2018, VW opened up in January a new sales office in Dallas to support the near 100 dealers spread thinly across 16 states.

Dependability may also need to improve, however, before buyers in more rural areas think about a VW.

"I think the biggest problem Volkswagen will need to address is its reliability issues, if it wants to make greater inroads into the American heartlands," said Gabriel Shenhar, Senior Auto Test Engineer & Program Manager at Consumer Reports.

In the hopes of better persuading Honda owners to defect, VW has poached marketing guru Tim Mahoney from Japanese rival Subaru of America (7270.T).

Known for his ability to hit an emotional nerve through ads like the Subaru Love campaign, he was recently voted by industry newspaper Automotive News as one of 10 managers to watch this year alongside such exalted peers as the group chief executives of Toyota, Ford and, yes, Honda.

BARKING DOGS
VW's traditional focus has been on its engineering prowess, but Mahoney favours funny skits like the "Vamonos" ad, with its clever emphasis on the fuel economy features of the VW Passat TDI.

"In a world of instant entertainment, companies can overestimate what a person can absorb in a 30 second spot that flashes over a TV screen," he told Reuters.

"But by engaging someone with ad they can relate to, you can draw people into a more complete experience offered on our website or get them to download the latest Golf racing app."

VW built on last year's Star Wars-themed "Force" commercial, voted the best ad of 2011 by industry publication Adweek, with a viral teaser spot on YouTube that featured a choir of dogs barking out the theme tune from the space saga.

Not so much as a front headlight - let alone a whole car - is ever shown, but the association with VW is unmistakable.

"People are even filming their dogs watching the spot and posting it on the internet. Humour is a big part of what we do and people like to participate," said Mahoney, a language major who studied in Vienna and Goettingen.

Honda's ad people are fighting back.

Fresh from a month of resurgent Civic sales in January, it is creating buzz with a popular ad where Matthew Broderick reprises his role from the 1980s hit "Ferris Bueller's Day Off", only this time he is behind the wheel of a CR-V crossover instead of a vintage Ferrari 250GT cabrio.

A Honda executive who worked for six years in the United States says last year marked the trough in sales for the brand, and the business there is now firmly on a path to recovery.

"It is true that Volkswagen has been expanding aggressively with success, but I believe the U.S. sales data for the new Civic in January is indicative of the new improving trend," Honda Europe President Manabu Nishimae told Reuters.

Just to make sure, though, American Honda reshuffled its management in order "to further speed decision-making and increase efficiency and competitiveness," it said last week.

Source;
http://www.reuters.com/article/2012/02/28/uk-volkswagen-honda-idUSLNE81R01V20120228

Honda Aims to Reclaim Its Luster

By NICK BUNKLEY

DETROIT — When everything seems to be going wrong, hire Jerry Seinfeld, bring back Ferris Bueller and pray. And even then things might not improve all that much.

That’s the predicament for Honda as it tries to recover from its troubles in the past year, when a series of natural disasters in Asia caused sales to plunge, and an important model, the revamped Civic, got such a poor reception that the company rushed to make changes.

Honda’s chief executive, Takanobu Ito, was so fearful that the company might be “jinxed” that he spent New Year’s Day at a Japanese shrine in the hope of eliminating the “bad omens,” he said recently. In commercials for Honda shown during the Super Bowl, Mr. Seinfeld is desperate to get the first Acura NSX, a concept car not coming to market for several years, and Matthew Broderick plays himself, taking a Bueller-like day off away from the movie set and giving a shout-out to the Honda CR-V.

The two ads were highly rated by viewers, and Honda is off to a better start in 2012, breaking a string of eight consecutive monthly sales declines in the United States with an 8.8 percent increase in January. But analysts do not foresee a smooth road back for the carmaker, whose market share dropped to 9 percent last year, the lowest level since 2005. Its share was 10.6 percent in 2010.

On Monday, Moody’s Investors Service cut Honda’s credit-rating outlook to negative from stable, citing “significant challenges” for Honda and doubts about how much market share the company can regain even after dealer inventories are back to full strength. “Although Honda still has a good reputation, the competition in the auto market is getting tougher because its rivals have improved their product quality and brand acceptance in the last several years,” Tadashi Usui, a vice president with Moody’s Investors Service in Tokyo, said in a report.

Honda executives, while projecting a 60 percent drop in net profits for the fiscal year that ends in March, have expressed confidence that the company is on the brink of a significant rebound. One goal is a 25 percent sales increase in the United States this year, helped by a redesigned CR-V crossover vehicle and several new models for its upscale Acura brand.

Honda unveiled the production versions of the Acuras, the RDX crossover and ILX compact car, this week at the Chicago auto show. They are part of a major push to expand Acura, whose sales last year suffered even more than the mainstream Honda brand. Honda executives have said they hope to sell 180,000 Acuras this year, which would represent a 46 percent increase. Still, the NSX featured in the Super Bowl ad is not scheduled to go on sale for about three years, and with a price expected to top $100,000, it will not be a very high-volume car.

“In order to grow, the product offering that they have needs to be more compelling,” said Rebecca Lindland, an analyst with the research firm IHS Automotive.

Honda was hit harder than other automakers by the earthquake and tsunami that devastated Japan last March. Its factories in Japan, North America and elsewhere were forced to stop or slow production for months because of parts shortages, and dealerships across the United States sold out of some popular models as a result.

A rival, Nissan, even ran a commercial showing a loaded Nissan car carrier passing an idle Honda dealer in an empty lot.

Honda was just beginning to recover from the tsunami when severe flooding in Thailand compounded the shortages. Executives say dealers should finally be back to normal inventory by the end of March, putting the company back on a level playing field with its rivals for the first time in nearly a year.

Honda’s inventories grew 38 percent from December to January.

“Last year we had a big handicap,” Tetsuo Iwamura, the chief executive of American Honda, said last month in Detroit, adding that 2012 “is the year that we will be able to show how Honda is competitive in the marketplace.”

Besides running plants on overtime to compensate for the lost production last year, Honda has worked to get vehicles to dealerships faster. By altering how it assembles shipments of various models and making other changes to its logistics operations, deliveries to crucial markets like Chicago and Houston occurred up to 15 percent faster, a Honda spokesman, Edward K. Miller, said.

“We thought we were efficient, but we discovered a whole lot of room for improvement,” Mr. Miller said in an e-mail. “Delivery times shrank dramatically.”

Honda has said it might cost $650 million to rebuild a plant in Thailand that was underwater for several weeks last fall. The damage and lost production from the flooding and the Japanese tsunami combined with the high value of the yen to cut Honda’s third-quarter earnings by 41 percent.

The company now expects to earn about 215 billion yen ($2.8 billion) in the current fiscal year, down from 534 billion ($6.9 billion) a year earlier. Its shares on the Tokyo Stock Exchange are down 20 percent in the past year, though they have risen 20 percent so far in 2012
For decades, Honda had been on a relentless march upward in the auto industry, steadily expanding its market share by churning out ever-larger quantities of cars consistently rated as the most fuel-efficient and reliable in the country. Though it has never been able to catch its rival, Toyota, in size, Honda always seemed equally invincible as the two companies wrested control of the American passenger-car market from Detroit.

After introducing itself to American shoppers in the 1970s with cars including the Civic, Honda turned its Accord into the top-selling Japanese car in each year from 1982 through 1996; the Accord was the first Japanese nameplate to be the country’s most popular car over all in 1989.
In the fall, Honda plans to bring out a redesigned version of the Accord, still its top-selling vehicle. Much of Honda’s ability to regain market share depends on the Accord’s being successful, and the stakes are even higher after the Civic elicited many negative reviews last year.

In addition, the Accord will face stiffer competition than in the past from other midsize sedans. Besides the Toyota Camry, whose sales have surged since it was redesigned last year, the Accord will be up against new versions of the Ford Fusion, which was a breakout hit at the auto show in Detroit last month, and Chevrolet Malibu.

“There’s going to be a lot of noise in the market in that particular segment,” said Ms. Lindland, the IHS Automotive analyst. “They’ve got to have a significant home run in order to get people to notice.”

Most notably, the magazine Consumer Reports, which historically has given high marks to most Hondas, stopped recommending that consumers buy the Civic. It said the car now “feels insubstantial with a cheap interior” and falls short of the standards set by improved compact-car models from Chevrolet, Ford and Hyundai, among others.

Though Honda officials disputed the notion that the Civic is not competitive — and pointed out that its sales jumped 50 percent in January, making it the month’s top-selling compact — the carmaker is accelerating what is known as a “midcycle refresh” of the car.

Executives told dealers attending a national convention last weekend that the refreshed 2013 Civic will arrive around the same time as the Accord, a mere 18 months after its introduction, the trade publication Automotive News reported. Automakers typically wait at least three years after introducing a model before making substantial changes.

Source;
http://www.nytimes.com/2012/02/09/business/global/beleaguered-honda-hopes-the-fates-are-kinder-in-2012.html?_r=1&nl=todaysheadlines&emc=tha25&pagewanted=print

Honda President Ito Forecasts Year of ‘Complete Rebound'

Jan. 27 (Bloomberg) -- Honda Motor Co. President Takanobu Ito forecast that business results at Japan's third-biggest carmaker will climb to the highest in at least five years, led by sales of Accord sedans and Civic compacts in North America.

Business results in the year ending March 2013 will recover to levels achieved before the failure of Lehman Brothers Holdings Inc. roiled global markets, as sales climb above 4 million vehicles for the first time, Ito said in an interview this week. Lehman filed for bankruptcy in September 2008, six months after Honda earned record annual profits.

“It will be the year of the complete rebound,” Ito said at the company's Tokyo headquarters. “Sales in North America will lead the recovery. We'll introduce a fully revamped Accord in the fall, and that will be a big plus to our sales.”

Ito's comments reflect a revival in confidence by Japanese automakers as they recover from a year plagued by natural disasters at home and in Thailand. Toyota Motor Corp., Asia's largest carmaker, said this week annual sales will be 100,000 units higher than it anticipated last month.

“Honda's targets are definitely aggressive, but the U.S. economy seems like it's going to recover to a better-than- expected level this year so it's likely for them to achieve it,” said Mitsushige Akino, who oversees $600 million at Ichiyoshi Investment Management Co. in Tokyo. “They've remodeled their best-selling cars, and we can expect strong sales in North America to help them regain market share.”

Reversal of Fortune
Honda fell 1.9 percent to close at 2,689 yen in Tokyo. It's gained 15 percent this year, the best performer among Japan's three biggest automakers. That's a reversal from 2011, when the stock's 27 percent drop made it the worst performer.

Honda's operating income, or sales minus the cost of goods sold and administrative expenses, will probably double to 586.6 billion yen ($7.6 billion) next fiscal year after shrinking 52 percent, according to the average of 24 analyst estimates compiled by Bloomberg. Earnings reached 953.1 billion yen, 851.9 billion yen and 868.9 billion yen, respectively, in the years before Lehman's bankruptcy.

Ito, 58, is counting on the U.S. market to drive growth.

Redesigned Accord
The redesigned Accord sedan, the Civic and CR-V sport- utility vehicle will help Honda increase U.S. sales 24 percent to 1.43 million units in 2012, Ito said. Sales in the market, Honda's largest, declined 6.8 percent last year, led by a 17 percent drop in deliveries of the Accord. The Accord is Honda's best-selling U.S. model, followed by the Civic.

Ito ruled out any major overhaul of the Civic after the current version of the sedan, which failed to receive the “recommended” status its predecessors had from Consumer Reports magazine, was the best-selling model in the compact-car segment in the last three months of the year.

Honda's new models will give it an edge in the U.S. over South Korea's Hyundai Motor Co., which is producing close to full-capacity, said Kota Yuzawa, a Tokyo-based analyst at Goldman Sachs Group Inc. That puts Honda in “good position” to regain lost market share, he said.

Honda may not be alone. Japan's three biggest carmakers are poised to gain market share this year at the expense of U.S. producers led by General Motors Co. and Ford Motor Co., according to five analysts surveyed by Bloomberg.

‘Unstoppable' Motorization
In China, the world's largest auto market, Honda expects its sales to rise more than 20 percent to 750,000 units in 2012 after they shrank for the first time in 2011 in a slowing market, Ito said. The company plans to introduce three gas- electric hybrid models in the country this year, he said.

“China is still strong,” Ito said. “Once motorization captures a market, it's unstoppable.”

China's total vehicle sales -- including cars, trucks and buses -- grew 2.5 percent to 18.5 million units last year, according to the China Association of Automobile Manufacturers, trailing growth in the U.S. for the first time in at least 14 years. Honda expects the market to expand to 20 million this year, or “just above” China's economic growth, he said.

In Thailand, where the country's worst floods in almost 70 years disrupted assembly plants and supply of components in 2011, Honda plans to resume production starting in April, Ito said. Damages stemming from Thailand forced the company to scrap this fiscal year's profit forecast.

Reorganizing Factories
As part of Honda's strategy of producing cars where they are sold, the company plans to reorganize its Japanese factories so they focus on production of minicars, a growing category that makes up about 40 percent of the nation's auto demand, Ito said. Orders for the N Box minicar in Japan reached 27,000 units in its first month of sales, more than double Honda's original target.

Minicars, defined as vehicles no longer than 3.4 meters (11 feet) in length, will account for 40 percent of Honda's Japan sales, compared with 25 percent now, Ito said.

Honda joins Toyota and Nissan in reorganizing operations as the yen, which has gained against the world's 16 most-traded currencies for two straight years, erodes the value of exports. Honda plans to boost the portion of vehicles sold in the same region they're built to as high as 80 percent, Ito said. In 2010, Honda sold about two out of three Japan-built cars in the country.

Officials at Toyota and Nissan this month have also echoed plans to increase their portion of vehicles sold in the region where they're assembled.

“Minicars will be key for us in Japan in the next five years,” Ito said.

Source;
http://news.businessweek.com/article.asp?documentKey=1376-LYALB80UQVI901-3I262TT8I3HDDBE46BK1GAN789

Honda Prays for Disaster-Free U.S. Rebound Led by New Models

By Alan Ohnsman
Dec. 5 (Bloomberg) -- Honda Motor Co. says replenished vehicle inventory and new Honda and Acura models planned for the next 24 months will spur a U.S. sales rebound next year after natural disasters dashed its 2011 goals.

Honda’s loss of some North American output in October and November due to parts shortages caused by floods in Thailand led to it being the only large automaker to post a U.S. sales decline last month as total sales jumped 14 percent. That came after six months of declines resulting from reduced auto inventory triggered by Japan’s March earthquake and tsunami.

“I’m going to the shrine to pray to avoid any more such disasters from Mother Nature,” Tetsuo Iwamura, Honda’s top North American executive, said in an interview on Dec. 2 in Las Vegas. “Next year, even starting this month, we’ll recover.”

Japan’s third-largest automaker counts on the U.S. for the largest portion of its global sales. Tight inventory and competition from Ford Motor Co., Hyundai Motor Co. and Kia Motors Corp. and others cut Tokyo-based Honda’s U.S. sales 5.3 percent through November.

While Honda’s market share has fallen to 9 percent from 10.5 percent so far in 2011, combined share for South Korean affiliates Hyundai and Kia rose to 9 percent from 7.8 percent a year ago.

“It is a year to forget, and then push the reset button,” said Rebecca Lindland, an analyst with researcher IHS Automotive. “We’re now seeing heavy replacement demand, so there is a lot of sales opportunity out there.”

IHS Automotive estimates U.S. sales of new cars and trucks will rise to about 13.7 million units in 2012, from about 12.7 million this year, she said.

‘Outrageous’ Competition

“The competition is outrageous and it’s coming from every part of the market,” Lindland said. “Every year we say this is an incredibly competitive market, but this year we mean it.”

Honda’s immediate goal is to boost production of its new Civic compact and CR-V compact sport-utility vehicle that goes on sale this month, Iwamura said. The company starts December with about a 40-day supply of vehicles, he said.

“Unfortunately, our competitors didn’t show us any mercy,” Iwamura said. “They took as much market share from us as they could. That’s the reality of the market. You have to fight back.”

In 2012, the company releases a revamped Accord, Honda’s top-selling U.S. nameplate, and other models Iwamura declined to identify. “Fortunately, we are going to have lots more models in the next 24 months,” he said.

New Engines, Hybrids

Vehicles coming out next year will also begin powered by new four- and six-cylinder engines and transmissions Honda unveiled last week at the Tokyo Motor Show, claiming they will lead the industry in fuel efficiency.

The company also will add new hybrid models from next year that will boost its reputation for fuel-efficiency and advanced technology, he said.

“New models with good technology, yet very value-oriented pricing for the sake of competitiveness,” said Iwamura, 60. “That is our key for a successful year in 2012 and onwards.”

Sales of the new Civic, released this year, will continue to increase and haven’t really been hurt by some critical reviews, he said.

“In November, Civic was the number one selling compact vehicle,” Iwamura said. “Customers still believe in the Civic.”

The 2012 Civic failed to receive the “recommended” status from Consumer Reports magazine. The revamped model “ranks near the bottom of its category,” David Champion, senior director of the magazine’s auto test center, said in an Aug. 1 e-mailed statement.

Honda’s U.S. headquarters are based in Torrance, California. The company’s American depositary receipts rose 0.3 percent to $31.59 at 9:35 a.m. New York time.

Source;
http://www.businessweek.com/news/2011-12-05/honda-prays-for-disaster-free-u-s-rebound-led-by-new-models.html