Civic: YTD sales may have risen, but not because of just rich incentives (if 1.9 or 2.9% APR is considered that).
Odyssey: Is in sixth year of model cycle, and a redesign is around the corner (this Fall).
Element: Exceeded sales expectation by a bunch, and a minor drop from it isn’t a sign of “struggle”, just a slow down. It sells alongside its virtual twin (CRV) and combined sales of the two is a better indicator of Honda’s position in this class of vehicles.
Recall: Operating costs go up and down, and are part of business. Not a sign of struggle.
Accord: Incentives may be growing, and will have to, especially given that Honda is sticking to five-year design cycle and other automakers aren’t shy of offering 0%/cashback even in latest models. Honda holds tight on not giving in to fleet sales (to bloat sales volume) and if it manages to extend the period when it is still chasing others to match incentives, it would still be doing okay. Not the ideal business scenario, but considering what everybody else is going thru, they would have to.
Product Range: Considering where Honda was a decade ago, and where it is today, I don’t see a consolidated lineup as a bad thing. In fact, Honda’s consolidation is something most automakers are striving for. In the next few months, Honda will have Jazz (launch next year) Civic (redesign next year) Accord (mid-model cycle refresh next year) with addition of Accord Hybrid this year Element (possible redesign next year) CRV (redesign next year) Pilot (possible refresh this year) Odyssey (redesign this year) Pick Up (launch next year)
It appears, all “Honda” offerings are either due for refresh or redesign within a year. Considering that even during time when everybody seems to call “struggle” and Honda is managing near all-time high in sales, the future doesn’t look bad.
Acura lineup RSX (redesign next year) TSX (continues to beat sales expectations/possible refresh next year) RDX (launch next year) TL (selling at an all-time high) MDX (continues to beat sales expectations/ redesign next year) RL (redesign this year) NSX (not a “sales car” but due for redesign next year)
V8 or not, “ladder-frame” or not, there is plenty of growth to be had in the near future. Beyond that, we shall see how it goes. Honda may not grow as quickly as it did in the past but does it have to? I remember a PR item from Honda’s current CEO that focus has to be one quality not quantity.
robertsmx-With regard to product, you're using a very liberal interpretation of a "year".
Based on the 5 year product cycle which you cited: The Civic redesign is for the 2006 MY, so we'll see it in OVER a year, meaning Fall of 2005. Same for the Acura RDX. Isnt it going to be a 2006 model? You really think the Element is going to fully redesigned for 2005 or 2006? I dont. It debuted as a 2002 (or 2003?), did it not? The CRV is due for a MY 2007 redesign, it debuted 2002, so figure Fall of 2006. Thats also not one year. The pickup launch is said to be Fall of 2005, as an 06, again, not a year. The RSX is also not due for a redesign next year, Im not sure where you are getting that from. The TSX is going to get a refresh in its second model year? News to me.
A $369 million dollar recall is still $369 million dollars less capital available, whether or not its part of normal operations. The point is that other things being equal, cash flows would be better without such an event.
It seems as though your post represents a lot of product optimism, or at least, a vague concept of what a "year" is.
andre-About incentives- financing is definitely consider an incentive, even if it might not make a big difference to an individual consumer, it does to the banks that are issuing the rates. Each percentage point is tied to a good deal of interest payment, and the difference between a 2.9% loan and a 5.9% may only seem like 3 % points, but to the entity, giving that rate to everyone who qualifies comes at a HUGE cost.
nipponly- again, I only presented the challenges that Honda is facing, based on my read of the article. Theres a lot more to the article than I summarized, so its not as shortsighted as you dismiss it to be. Im not about to re-write it, so go read it, and perhaps wait to base an opinion on how it was written until you do. The bottom line is that Honda has lost market share, to the tune of 1.4% over the past two years. With regard to incentives, my aunt obtained her Civic in February, when dealer incentives were at $1000, and she got 2.9% for 60 months, fwiw. Also, because of Hondas strong resale, they push a lot more incentives through leases than do other mfrs.
Do I think Honda is in trouble? Absolutely Not. However, I do think its a bit absurd to dismiss recent sales trends and other challenges the company is facing in today's ultra-competitive market. A whopping 80% of Hondas Net is derived in the US. Honda just needs to be paying attention to EVERYTHING thats going on.
Next year is 2005. Early or late it's still 2005. Even if the 06's come out in October, it's still next year.
I'm sure the $369 million isn't just sitting aside in cash somewhere. It's probably in some type of investment so it's still "working" for the company. I mean I have a "nest egg" that I keep for emergencies, but it's in a fund that I can get to easily. I'm sure Honda pays people much smarter than I am to keep an eye on the bottom line.
Vague concept of year has been cultivated by the auto industry that says you can put out a model year 2006 vehicle in January 2005. Kinda like the new 2005 Ford F-150 or the 05 Chevy Equinox launch this year.
Honda owns the "bank". Even 1.9% is making money. And you have to "qualify" for it. Honda requires a 700 beacon to get the 1.9%. Don't have the score you get a higher rate. Honda's not Mitsubishi which was giving 0% to people with questionable credit histories.
As for the leases. Got my Ody on one. I'm sure there are statisticians that worked the numbers. Considering the number of leases that are never completed due to accidents, theft, and bankrupcy I'm sure Honda will do just fine. If nothing else, they move the debt from the Automaker side of Honda to the bank side. The dealership (automaker)gets the full principle cost of the van. It's up to HAFC to make a profit on the lease.
When some one says "in one year" to me, that means 12 months. The vehicles I mentioned above (Civic, RDX, RSX, CRV, Element, TSX) are not going to be newly available or fully redesigned in the next 12 months. I dont really see how thats open to debate. Its a fact.
For what its worth, Hondas fiscal year ends March 31st, so its just into its current fiscal year, and the point of the article is that the only significantly new vehicles that we'll see in the US this (fiscal year) for Honda are the RL, Ody, and Hybrid Accord. All of the others, mentioned above, will not affect any financial statements for the CURRENT fiscal year.
"Next Year" means next model year. True, in case of Hondas, model year starts in late summer. For Acura, it can be Spring (TSX was launched as 2004 model on March 31, 2003, and so was 2005 TL this year).
The essence of my post was that Honda is about ready to change or add new models to its lineup in a relatively short period of time.
"Recalls" are a part of business, and everybody must deal with it.
But as Ive stated, in the context of the article, next year most likely means fiscally for Honda.
Even by your definition of next model year, whether it be a 2005 Honda introed this Fall or a 2006 Acura introed next Spring, many of the vehicles which you mention will not have full redesigns (such as the CRV, Element, Civic, RSX, TSX, etc).
"The essence of my post was that Honda is about ready to change or add new models to its lineup in a relatively short period of time."
I understand your point, but this is true of most of the mfrs. that use shorter model terms then the domestics.
Thanks for the succint summary of the BusinessWeek article.
Honda's basic problem is that the markets it is in are also the most competitive and brutal. The compact sedan, midsize sedan, small SUV, midsize SUV and minivan markets are crowded with players and competition, especially with the Koreans coming on and the domestics refocusing on the car market.
Under those circumstances, Honda would be losing profits (although still doing OK) even with perfect execution. Of course, as evidenced by the transmission problems, execution has been less than perfect (although still good).
I think Honda management was smart to recognize this and that's why the increased emphasis on Acura, the latest models MDX, TSX and TL are all doing well. However, there's a very definite limit to FWD luxury and if SH-AWD doesn't pan out (it could be great but the market doesn't take to it), then Honda's stubborn refusal to invest in a RWD platform and get into trucks/big SUVs will come back to haunt them.
gas prices at $2 a gallon sound high but in terms of inflation are still less than they were 2 yrs. ago.
also, it seems GM, Chrysler, Honda are offering DoD or VCM (displacement on demand or variable cylinder management) turning off half the cylinders as needed, which should save their bacon. the other manufacturers have some fuel saving tech on board as well.
I agree with nvbanker. Gas prices normalized for inflation are at highest levels since the Persian Gulf war, not a scant 2 years ago. Inflation has been hovering around 2%, I believe, for the better part of the past 3 years. Gas prices, on the other hand, have risen an average of $.55/gal since this time last year.
Andre - I had an '86 Cavalier Z24 (first year they were made). Death by head gasket at about 130K miles, but it had plenty of other problems, too.
Alpha - Regarding the BW article (thanks for the summary): No offense, I know you didn't write it, but I've got to confess to something of a giggle when I read about Honda being in trouble because they don't offer RWD, a big SUV, trucks, and V8s. I mean, it wasn't that long ago that they didn't have any SUVs. It wasn't until 1999 that they got an American-style minivan.
In the face of the product blitz coming from Ford and Chevy, I can understand why the folks at BW might think that Honda's offerings look pretty slim. But in 2006 those same people will be saying that Ford and Chevy haven't done anything since that big product blitz "way back in 2004", and conclude that they must be in trouble.
I mean, I wish saug were right, I'm just not sure about the facts, given what I'm paying for gas today vs. even last year. I'd have to run the numbers.
According to today's edition of The Philadelphia Inquirer, in 1981 gas prices peaked at the equivalent of $2.99 a gallon in today's dollars. We still haven't hit a record high for gas prices yet.
The same article interviewed a Philadelphia-area Honda dealer. He noted that his hottest selling product is...the Honda Pilot. The Civic Hybrids, on the other hand, remain nailed to the showroom floor.
lemko: Maybe 100,000 miles from a Cavalier is about normal, but most people I know get much higher mileage from their Civics. Which may be why GM needs to slap $4,000 in rebates on the Cavalier to move it.
sorry, meant to say last 20 years. I remember gas being $1.30 in the mid 70's, so $2.00 doesn't seem too bad given the amount of inflation that's occurred since then.
Ha! I wish. It is now $2.35 where I live. And the local Honda dealer moves all his large vehicles with ease, it seems, while the Accords and Civics seem to sit around for a goodly while. But that is just an "eyeball survey", not like I am out there every weekend taking down VINs or anything! It is just right by the freeway so I see it almost every day. :-)
with these gas prices spiraling up, maybe Honda should push up the intro of that hybrid Accord. I bet that would set the Accord sales zooming up.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
"BTW, here's a link that describes why Civic's switching to the McPherson struts from the double wishbone screwed up the car's handling."
That's just a general discussion of the merits of different suspension designs. It's very interesting from an academic standpoint, a bit less so from a real world standpoint, but one can demonstrate that the "rules" the article presents are meant to be broken. Example... since the RSX shares its platform with the Civic, it shares all of the alleged disadvantages of the FWD/strut configuration. Yet the RSX receives high praise for its handling from many owners and experts alike. This shows what can be accomplished with the shared platform when sport is the primary goal, the theoretical and practical disadvantages notwithstanding.
The handling of the current Civic is as much a result of Honda's tuning decisions as the switch in suspension design. Clearly there are differing schools of thought regarding how successful they were overall. Some think they "screwed up" the handling, others contend that the handling is just fine.
actually, for awhile in 2000, we did see some incredibly high gas prices. I remember some of the stations around here were over $2.00 a gallon for premium. But then, by October of 2001, in some areas we were down to under a buck a gallon for 87 octane, and I remember filling up my '79 NYer for the first time, the day I brought it home, for $1.059 a gallon, for 93!
Of course today, $2.00 a gallon for premium would be comparatively cheap!!
alpha01 If you go by fiscal year, then it would end March 2005. Between then and now, AHM will release a new RL, new Odyssey and add Hybrid trim to Accord. That is not too bad, is it?
"Maybe 100,000 miles from a Cavalier is about normal, but most people I know get much higher mileage from their Civics. Which may be why GM needs to slap $4,000 in rebates on the Cavalier to move it."
And I have to agree with both comments. I think the Cavalier is at best, a 100,000 mile car - but my 89 Civic went 180,000 miles with NO significant issues at all, just routine maintenance, and was still going when I sold it. It was starting to use some oil, but ran great, passed smog, was no where near done. So there is a huge difference between the two IMO. Add to it, the refinement of a Civic, Corolla, Mazda 3, even Focus, vs. a Cavalier, and I have a hard time understanding why FREE isn't about the price GM can get for a Cavalier. I'd take one free.
varmint- thanks for the shout out- My apologies for not linking the article, I thought BW was a pay-for site.
robertsmx-In post 576, I said "For what its worth, Hondas fiscal year ends March 31st, so its just into its current fiscal year, and the point of the article is that the only significantly new vehicles that we'll see in the US this (fiscal year) for Honda are the RL, Ody, and Hybrid Accord."
And then in post 595, you state "If you go by fiscal year, then it would end March 2005. Between then and now, AHM will release a new RL, new Odyssey and add Hybrid trim to Accord."
Going by your post #578 pertaining to current fiscal years...
"many of the vehicles which you mention will not have full redesigns"
Two redesigns, and an additional trim is normal for Honda. Pick any year (fiscal or not), and you will see a trend. Nobody redesigns/refreshes every model, every year. How many would be your expectation, or those that you would consider a norm?
We all seem to have made up our mind, haven’t we?
I see two possibilities regarding choice of words by Forbes. One, exaggeration of struggle (the very existence of this thread is a classic illustration). And the aggression on incentives from the competition, with Honda on one side (reluctant) and others on the other.
"One, exaggeration of struggle (the very existence of this thread is a classic illustration)."
That's the only think I could think of in terms of what they were trying to say and why you liked the title, but the article doesn't seem to support that idea, which is why I'm not exactly sure what they mean by it.
I really don't think the number of projects is the best way to judge whether or not they will have an impact on Honda's market share, bottom line, or image here in North America. One project can be enough to generate lots of buzz if it goes well.
For example, I think the new Ody will most likely have a big boost on public perception. The current design is still at the top of its game, placing 1st and 2nd in mag comparos even with very recent redesigns. Even if the new model is not significantly better than the current one (how likely is that...), the simple fact that it is new should give sales a boost. It's a difference of good vs great.
I think that will generate quite a bit of showroom traffic and maybe sell a few more Pilots as a result.
On the other hand, the Accord hybrid could generate good will with the green buyers and the technophiles, but it won't help the bottom line or market share. It's not a big fish.
The new RL is an unknown. I mean, there's no way it could sell worse than the current RL or bring the brand image down any further. So, it's got to be good for the company. But how good remains to be seen. If it's as good as it looks on paper, I think Acura will have succeeded in reinventing the marque. On the other hand, the $50K range is not a big wedge on the market pie graph. Sure, it's growing, but it's not huge.
Another semi-important event on the horizon, is the refresh for the CR-V. We are expecting a more stylish SE trim, increased levels of (standard) safety equipment, and more content (like bigger rims) on other models. That should be worth a sales increase of about 5-10% for the next year and keep sales level until the 2007 MY redesign. In other words, a short boost and enough to help it past its mid-life crisis.
Why is it that Toyota and Nissan are cranking i the US market while Honda is getting beaten up?
Honda's decision not to expand into big trucks/SUVs and RWD is hurting them here.
Also, how come Honda isn't getting more $ out of Europe? I'd think Honda's low displacement, high revving, gasoline friendly, reliable cars would do real well there.
However, since the Titan and Armada are all-new it will still translate to an overall sales increase for Nissan.
Honda and Toyota are both seeing sales increases in it's trucks through the first quarter of 2004. The only Honda SUV that was down through March is the Element and that's only by 500 units.
As for the sedans, again Honda is selling the Accord with minimal incentives compared to the competition. Toyota is selling more Camrys but at almost no profit. Would you rather sell 5 cups of lemonade for $1.00 or try to sell 10 cups and have to give a $.50 coupon to do so? Your overall sales are higher at 10 cups but the bottom-line is the same.
Europeans buy less than 1/3 as many cars as Americans annually. Also, they have a lot less local production there, and the yen is so strong it reduces profits on vehicles manufactured elsewhere and shipped over there.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
Honda is doing well in Europe (April sales were up 13.8%). More than small displacement engines, it is diesels that Honda needed. With Isuzu supplied diesel for Civic, and Honda's own 2.2 liter diesel in Accord, sales have gone up, and will continue to when more diesel engines/vehicles are offered.
In the USA, Honda's light truck sales have been getting better. In the first quarter of calendar year 2004, Pilot sales was up 17%, combined sales of Element/CRV was slightly up (48,858 compared to 48,476 last year). MDX is selling better than ever as well (up 8%).
Only Odyssey has slowed down, and makes sense since this is the last year of its design. The new Odyssey arrives in a few months.
Civic sales are up, compared to last year. S2000 is selling just as well, or slightly better than last year.
TL and TSX moving quickly. That leaves just two cars... RSX and Accord.
Accord may not be meeting sales from last year as of now, but that can quickly change as well. It is still the second best selling car in America with 2% or less of the sames going to fleets! And we call that "struggle"!
RSX is a car that needs refocus on Acura's part. Perhaps it will be done soon. But, its more expensive cousins are carrying the sales anyway.
Nissan has shown major improvement in terms of sales, but because of a flurry of products. And that happens as a result of Renault's investment into Nissan, with the company having to go nowhere but up.
Toyota continues to be aggressive, and it can afford to, at least as of now. How long will it be able to sustain it, remains to be seen.
I don't think a quick growth defines success, slow and steady but prolonged growth does.
and should be said again: for Acura to enter the luxury market properly, they need to trade one "acronym" for another. Dump RSX (has always been a glorified Civic with nicer fittings and a little more power, this year the base doesn't even have more power), and develop RWD.
It is inevitable, maybe Honda already realizes this.
I wonder if they will be able to offer more variety in the Civic line for the next redo (next year). And a less stripped base model. I mean, the Civic (and Accord too) DX is a very basic car, and these days the Koreans (and Chevy) have cheap cars covered. Honda would do better to offer a nicer base car, especially if they are bringing in a less expensive model line (Fit).
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
I am with you there - and I would infinitely prefer Acura styling to the current ick that is BMW. Not to mention I value reliability more than the average car enthusiast.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
"Why is it that Toyota and Nissan are cranking i the US market while Honda is getting beaten up?"
Well, styling could be a lot of it. Although Toyota isn't known for great style, Nissan has woke up the entire Asian world with some really in your face looks and designs of late, and of the 3, Honda is most invisible IMO.
"I wonder if they will be able to offer more variety in the Civic line for the next redo (next year). And a less stripped base model. I mean, the Civic (and Accord too) DX is a very basic car, and these days the Koreans (and Chevy) have cheap cars covered. Honda would do better to offer a nicer base car"
Sounds good. I think they should offer two engines in the Civic. Keep and improve the 1.7L for the economy conscience folks, and offer the 160 hp 2.0L or 2.4L (in the sedan and coupe) to get back the customers that want something reliable, somewhat efficient, AND sporty. I think VW's run with the Jetta (a "premium" small car) is over because of reliability issues, and Honda could snap up a lot of those disgruntled owners with a "premium" Civic in sedan and coupe form. That way, they'd also have a Civic to go up against the Mazda3 and Scion Tc....and I think the Si just looks too goofy which is why it isn't selling very well.......well that, and it's way overpriced.
"I would pay just as much for a Honda/Acura straight 6, 50-50 balanced RWD car as I would for a BMW."
Me too because I KNOW Honda could make a killer BMW clone. I love BMWs, but the 3 series is the only one that hasn't been ruined yet and German cars scare me. If not for sales, a true 3 series and Lexus IS competitor (nice try TSX) would do a lot to validate Acura's image as a sporty luxury car maker. If they can get away with selling hardly any NSXs, I don't see why they don't take a shot at RWD.
I guess it could happen, but it's not Honda's way. They have carved out a niche that works very well for them in small cars, and small cars do ok with FWD generally. Also they don't wanna do trucks either. I'm not sure in the long run, they aren't making the right decision. Everybody doesn't have to be Toyota....do they?
"Nissan has woke up the entire Asian world with some really in your face looks and designs of late, and of the 3, Honda is most invisible IMO."
Several of their recent designs suggest that their track record of styling success may be brief. Design atrocities such as the new Maxima and the Quest are so ugly that they could wake the dead.
People will begin to tire of "in your face" for the sake of "in your face".
"take a shot at RWD? I guess it could happen, but it's not Honda's way"
They took very un-Honda like shots with the S2000 and NSX, which are about as niche as you can get. Lexus and Infiniti seem to be doing OK with RWD cars. Where are the RWD cars Acura? If their FWD cars are that good, you KNOW the RWD cars would be knockouts.
It made more business sense for Honda to go RWD in the early 90s when Cadillac was weak and MB and BMW was wresting on their laurels.
Now the RWD market is more competitive, although the Germans have bumbled a bit.
There are short-sighted business reasons for Honda not to go into the RWD market. It's expensive to develop all those new platforms for one, and two Honda risks cannibalizing sales of its already developed TL and RL. Furthermore, whereas TL and TSX costs can be spread out over all the downmarket Hondas, Acura RWD cars do not get the benefits of downmarket cars to spread out costs.
In the long term, however, getting into RWD is a good move b/c once the initial development costs have been amortized, Honda can eat BMW's lunch for years of profits. Also, the domestics and Hyundai's expansion into the FWD economy car market is inevitably going to eat away at Honda's margins.
Honda is standing still while everybody else (especially Toyota) is moving forward.
"It made more business sense for Honda to go RWD in the early 90s when Cadillac was weak and MB and BMW was wresting on their laurels."
Yeah, it probably made a lot more sense to go after BMW, MB, and Lexus than for Honda to build a Ferrari clone.
"It's expensive to develop all those new platforms for one, and two Honda risks cannibalizing sales of its already developed TL and RL. Furthermore, whereas TL and TSX costs can be spread out over all the downmarket Hondas"
What's the deal with the S2000 then? Develop a platform to be used for ONE vehicle that doesn't sell anywhere near typical Honda volumes?
That's what doesn't make sense to me. They spent money on a mid-engine wannabe Ferrari and a RWD Miata killer, but no RWD luxury/sport sedan???????
Regarding the threat posed by Nissan - Business Week recently featured an article highlighting quality problems with several new Nissan vehicles, focusing in particular on the Pathfinder Armada.
varmint: I was surprised that the Philadelphia Honda dealer noted weak sales for the Civic Hybrid. Philadelphia and its suburbs should be a decent market for the Civic Hybrid.
Comments
Odyssey: Is in sixth year of model cycle, and a redesign is around the corner (this Fall).
Element: Exceeded sales expectation by a bunch, and a minor drop from it isn’t a sign of “struggle”, just a slow down. It sells alongside its virtual twin (CRV) and combined sales of the two is a better indicator of Honda’s position in this class of vehicles.
Recall: Operating costs go up and down, and are part of business. Not a sign of struggle.
Accord: Incentives may be growing, and will have to, especially given that Honda is sticking to five-year design cycle and other automakers aren’t shy of offering 0%/cashback even in latest models. Honda holds tight on not giving in to fleet sales (to bloat sales volume) and if it manages to extend the period when it is still chasing others to match incentives, it would still be doing okay. Not the ideal business scenario, but considering what everybody else is going thru, they would have to.
Product Range: Considering where Honda was a decade ago, and where it is today, I don’t see a consolidated lineup as a bad thing. In fact, Honda’s consolidation is something most automakers are striving for. In the next few months, Honda will have
Jazz (launch next year)
Civic (redesign next year)
Accord (mid-model cycle refresh next year) with addition of Accord Hybrid this year
Element (possible redesign next year)
CRV (redesign next year)
Pilot (possible refresh this year)
Odyssey (redesign this year)
Pick Up (launch next year)
It appears, all “Honda” offerings are either due for refresh or redesign within a year. Considering that even during time when everybody seems to call “struggle” and Honda is managing near all-time high in sales, the future doesn’t look bad.
Acura lineup
RSX (redesign next year)
TSX (continues to beat sales expectations/possible refresh next year)
RDX (launch next year)
TL (selling at an all-time high)
MDX (continues to beat sales expectations/ redesign next year)
RL (redesign this year)
NSX (not a “sales car” but due for redesign next year)
V8 or not, “ladder-frame” or not, there is plenty of growth to be had in the near future. Beyond that, we shall see how it goes. Honda may not grow as quickly as it did in the past but does it have to? I remember a PR item from Honda’s current CEO that focus has to be one quality not quantity.
Based on the 5 year product cycle which you cited:
The Civic redesign is for the 2006 MY, so we'll see it in OVER a year, meaning Fall of 2005. Same for the Acura RDX. Isnt it going to be a 2006 model? You really think the Element is going to fully redesigned for 2005 or 2006? I dont. It debuted as a 2002 (or 2003?), did it not? The CRV is due for a MY 2007 redesign, it debuted 2002, so figure Fall of 2006. Thats also not one year. The pickup launch is said to be Fall of 2005, as an 06, again, not a year. The RSX is also not due for a redesign next year, Im not sure where you are getting that from. The TSX is going to get a refresh in its second model year? News to me.
A $369 million dollar recall is still $369 million dollars less capital available, whether or not its part of normal operations. The point is that other things being equal, cash flows would be better without such an event.
It seems as though your post represents a lot of product optimism, or at least, a vague concept of what a "year" is.
andre-About incentives- financing is definitely consider an incentive, even if it might not make a big difference to an individual consumer, it does to the banks that are issuing the rates. Each percentage point is tied to a good deal of interest payment, and the difference between a 2.9% loan and a 5.9% may only seem like 3 % points, but to the entity, giving that rate to everyone who qualifies comes at a HUGE cost.
nipponly- again, I only presented the challenges that Honda is facing, based on my read of the article. Theres a lot more to the article than I summarized, so its not as shortsighted as you dismiss it to be. Im not about to re-write it, so go read it, and perhaps wait to base an opinion on how it was written until you do. The bottom line is that Honda has lost market share, to the tune of 1.4% over the past two years. With regard to incentives, my aunt obtained her Civic in February, when dealer incentives were at $1000, and she got 2.9% for 60 months, fwiw. Also, because of Hondas strong resale, they push a lot more incentives through leases than do other mfrs.
Do I think Honda is in trouble? Absolutely Not. However, I do think its a bit absurd to dismiss recent sales trends and other challenges the company is facing in today's ultra-competitive market. A whopping 80% of Hondas Net is derived in the US. Honda just needs to be paying attention to EVERYTHING thats going on.
Just my .02
~alpha
I'm sure the $369 million isn't just sitting aside in cash somewhere. It's probably in some type of investment so it's still "working" for the company. I mean I have a "nest egg" that I keep for emergencies, but it's in a fund that I can get to easily. I'm sure Honda pays people much smarter than I am to keep an eye on the bottom line.
Vague concept of year has been cultivated by the auto industry that says you can put out a model year 2006 vehicle in January 2005. Kinda like the new 2005 Ford F-150 or the 05 Chevy Equinox launch this year.
Honda owns the "bank". Even 1.9% is making money. And you have to "qualify" for it. Honda requires a 700 beacon to get the 1.9%. Don't have the score you get a higher rate. Honda's not Mitsubishi which was giving 0% to people with questionable credit histories.
As for the leases. Got my Ody on one. I'm sure there are statisticians that worked the numbers. Considering the number of leases that are never completed due to accidents, theft, and bankrupcy I'm sure Honda will do just fine. If nothing else, they move the debt from the Automaker side of Honda to the bank side. The dealership (automaker)gets the full principle cost of the van. It's up to HAFC to make a profit on the lease.
So basically, all 1.9% is doing is losing less money than 0% ;-)
When some one says "in one year" to me, that means 12 months. The vehicles I mentioned above (Civic, RDX, RSX, CRV, Element, TSX) are not going to be newly available or fully redesigned in the next 12 months. I dont really see how thats open to debate. Its a fact.
For what its worth, Hondas fiscal year ends March 31st, so its just into its current fiscal year, and the point of the article is that the only significantly new vehicles that we'll see in the US this (fiscal year) for Honda are the RL, Ody, and Hybrid Accord. All of the others, mentioned above, will not affect any financial statements for the CURRENT fiscal year.
~alpha
The essence of my post was that Honda is about ready to change or add new models to its lineup in a relatively short period of time.
"Recalls" are a part of business, and everybody must deal with it.
Even by your definition of next model year, whether it be a 2005 Honda introed this Fall or a 2006 Acura introed next Spring, many of the vehicles which you mention will not have full redesigns (such as the CRV, Element, Civic, RSX, TSX, etc).
"The essence of my post was that Honda is about ready to change or add new models to its lineup in a relatively short period of time."
I understand your point, but this is true of most of the mfrs. that use shorter model terms then the domestics.
~alpha
Honda's basic problem is that the markets it is in are also the most competitive and brutal. The compact sedan, midsize sedan, small SUV, midsize SUV and minivan markets are crowded with players and competition, especially with the Koreans coming on and the domestics refocusing on the car market.
Under those circumstances, Honda would be losing profits (although still doing OK) even with perfect execution. Of course, as evidenced by the transmission problems, execution has been less than perfect (although still good).
I think Honda management was smart to recognize this and that's why the increased emphasis on Acura, the latest models MDX, TSX and TL are all doing well. However, there's a very definite limit to FWD luxury and if SH-AWD doesn't pan out (it could be great but the market doesn't take to it), then Honda's stubborn refusal to invest in a RWD platform and get into trucks/big SUVs will come back to haunt them.
also, it seems GM, Chrysler, Honda are offering DoD or VCM (displacement on demand or variable cylinder management) turning off half the cylinders as needed, which should save their bacon. the other manufacturers have some fuel saving tech on board as well.
so we'll see.
~alpha
Alpha - Regarding the BW article (thanks for the summary): No offense, I know you didn't write it, but I've got to confess to something of a giggle when I read about Honda being in trouble because they don't offer RWD, a big SUV, trucks, and V8s. I mean, it wasn't that long ago that they didn't have any SUVs. It wasn't until 1999 that they got an American-style minivan.
In the face of the product blitz coming from Ford and Chevy, I can understand why the folks at BW might think that Honda's offerings look pretty slim. But in 2006 those same people will be saying that Ford and Chevy haven't done anything since that big product blitz "way back in 2004", and conclude that they must be in trouble.
The same article interviewed a Philadelphia-area Honda dealer. He noted that his hottest selling product is...the Honda Pilot. The Civic Hybrids, on the other hand, remain nailed to the showroom floor.
lemko: Maybe 100,000 miles from a Cavalier is about normal, but most people I know get much higher mileage from their Civics. Which may be why GM needs to slap $4,000 in rebates on the Cavalier to move it.
http://autozine.kyul.net/technical_school/handling/tech_handling_- 6.htm
with these gas prices spiraling up, maybe Honda should push up the intro of that hybrid Accord. I bet that would set the Accord sales zooming up.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
That's just a general discussion of the merits of different suspension designs. It's very interesting from an academic standpoint, a bit less so from a real world standpoint, but one can demonstrate that the "rules" the article presents are meant to be broken. Example... since the RSX shares its platform with the Civic, it shares all of the alleged disadvantages of the FWD/strut configuration. Yet the RSX receives high praise for its handling from many owners and experts alike. This shows what can be accomplished with the shared platform when sport is the primary goal, the theoretical and practical disadvantages notwithstanding.
The handling of the current Civic is as much a result of Honda's tuning decisions as the switch in suspension design. Clearly there are differing schools of thought regarding how successful they were overall. Some think they "screwed up" the handling, others contend that the handling is just fine.
Of course today, $2.00 a gallon for premium would be comparatively cheap!!
If you go by fiscal year, then it would end March 2005. Between then and now, AHM will release a new RL, new Odyssey and add Hybrid trim to Accord. That is not too bad, is it?
And I have to agree with both comments. I think the Cavalier is at best, a 100,000 mile car - but my 89 Civic went 180,000 miles with NO significant issues at all, just routine maintenance, and was still going when I sold it. It was starting to use some oil, but ran great, passed smog, was no where near done. So there is a huge difference between the two IMO. Add to it, the refinement of a Civic, Corolla, Mazda 3, even Focus, vs. a Cavalier, and I have a hard time understanding why FREE isn't about the price GM can get for a Cavalier. I'd take one free.
http://yahoo.businessweek.com/magazine/content/04_21/b3884079.htm
Here's an older one from Forbes. (I think it's already been posted here.)
http://www.forbes.com/business/2004/05/11/cz_jf_0511flint.html?pa- - rtner=yahoo&referrer=
IMHO, the Forbes write-up does a better job of putting Honda's problems in proper context. Yet, it doesn't gloss over them.
Why? What do you think Forbes means by that?
Forbes article has an interesting choice of words for its title.
robertsmx-In post 576, I said "For what its worth, Hondas fiscal year ends March 31st, so its just into its current fiscal year, and the point of the article is that the only significantly new vehicles that we'll see in the US this (fiscal year) for Honda are the RL, Ody, and Hybrid Accord."
And then in post 595, you state "If you go by fiscal year, then it would end March 2005. Between then and now, AHM will release a new RL, new Odyssey and add Hybrid trim to Accord."
Whats your point?
~alpha
"many of the vehicles which you mention will not have full redesigns"
Two redesigns, and an additional trim is normal for Honda. Pick any year (fiscal or not), and you will see a trend. Nobody redesigns/refreshes every model, every year. How many would be your expectation, or those that you would consider a norm?
I know, but obviously, you've drawn your own conclusion because you have an opinion on that statement. So what do YOU think they mean by that?
I don't know what they mean by that.
I see two possibilities regarding choice of words by Forbes. One, exaggeration of struggle (the very existence of this thread is a classic illustration). And the aggression on incentives from the competition, with Honda on one side (reluctant) and others on the other.
Let me see what your version suggests.
That's the only think I could think of in terms of what they were trying to say and why you liked the title, but the article doesn't seem to support that idea, which is why I'm not exactly sure what they mean by it.
For example, I think the new Ody will most likely have a big boost on public perception. The current design is still at the top of its game, placing 1st and 2nd in mag comparos even with very recent redesigns. Even if the new model is not significantly better than the current one (how likely is that...), the simple fact that it is new should give sales a boost. It's a difference of good vs great.
I think that will generate quite a bit of showroom traffic and maybe sell a few more Pilots as a result.
On the other hand, the Accord hybrid could generate good will with the green buyers and the technophiles, but it won't help the bottom line or market share. It's not a big fish.
The new RL is an unknown. I mean, there's no way it could sell worse than the current RL or bring the brand image down any further. So, it's got to be good for the company. But how good remains to be seen. If it's as good as it looks on paper, I think Acura will have succeeded in reinventing the marque. On the other hand, the $50K range is not a big wedge on the market pie graph. Sure, it's growing, but it's not huge.
Another semi-important event on the horizon, is the refresh for the CR-V. We are expecting a more stylish SE trim, increased levels of (standard) safety equipment, and more content (like bigger rims) on other models. That should be worth a sales increase of about 5-10% for the next year and keep sales level until the 2007 MY redesign. In other words, a short boost and enough to help it past its mid-life crisis.
Honda's decision not to expand into big trucks/SUVs and RWD is hurting them here.
Also, how come Honda isn't getting more $ out of Europe? I'd think Honda's low displacement, high revving, gasoline friendly, reliable cars would do real well there.
Nissan isn't doing too well with the Armada, Titan, and Quest. At least not as well as they hoped.
http://www.detnews.com/2004/autosinsider/0405/12/a01-150861.htm
However, since the Titan and Armada are all-new it will still translate to an overall sales increase for Nissan.
Honda and Toyota are both seeing sales increases in it's trucks through the first quarter of 2004. The only Honda SUV that was down through March is the Element and that's only by 500 units.
As for the sedans, again Honda is selling the Accord with minimal incentives compared to the competition. Toyota is selling more Camrys but at almost no profit. Would you rather sell 5 cups of lemonade for $1.00 or try to sell 10 cups and have to give a $.50 coupon to do so? Your overall sales are higher at 10 cups but the bottom-line is the same.
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
In the USA, Honda's light truck sales have been getting better. In the first quarter of calendar year 2004, Pilot sales was up 17%, combined sales of Element/CRV was slightly up (48,858 compared to 48,476 last year). MDX is selling better than ever as well (up 8%).
Only Odyssey has slowed down, and makes sense since this is the last year of its design. The new Odyssey arrives in a few months.
Civic sales are up, compared to last year. S2000 is selling just as well, or slightly better than last year.
TL and TSX moving quickly. That leaves just two cars... RSX and Accord.
Accord may not be meeting sales from last year as of now, but that can quickly change as well. It is still the second best selling car in America with 2% or less of the sames going to fleets! And we call that "struggle"!
RSX is a car that needs refocus on Acura's part. Perhaps it will be done soon. But, its more expensive cousins are carrying the sales anyway.
Nissan has shown major improvement in terms of sales, but because of a flurry of products. And that happens as a result of Renault's investment into Nissan, with the company having to go nowhere but up.
Toyota continues to be aggressive, and it can afford to, at least as of now. How long will it be able to sustain it, remains to be seen.
I don't think a quick growth defines success, slow and steady but prolonged growth does.
It is inevitable, maybe Honda already realizes this.
I wonder if they will be able to offer more variety in the Civic line for the next redo (next year). And a less stripped base model. I mean, the Civic (and Accord too) DX is a very basic car, and these days the Koreans (and Chevy) have cheap cars covered. Honda would do better to offer a nicer base car, especially if they are bringing in a less expensive model line (Fit).
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
2014 Mini Cooper (stick shift of course), 2016 Camry hybrid, 2009 Outback Sport 5-spd (keeping the stick alive)
Well, styling could be a lot of it. Although Toyota isn't known for great style, Nissan has woke up the entire Asian world with some really in your face looks and designs of late, and of the 3, Honda is most invisible IMO.
Sounds good. I think they should offer two engines in the Civic. Keep and improve the 1.7L for the economy conscience folks, and offer the 160 hp 2.0L or 2.4L (in the sedan and coupe) to get back the customers that want something reliable, somewhat efficient, AND sporty. I think VW's run with the Jetta (a "premium" small car) is over because of reliability issues, and Honda could snap up a lot of those disgruntled owners with a "premium" Civic in sedan and coupe form. That way, they'd also have a Civic to go up against the Mazda3 and Scion Tc....and I think the Si just looks too goofy which is why it isn't selling very well.......well that, and it's way overpriced.
"I would pay just as much for a Honda/Acura straight 6, 50-50 balanced RWD car as I would for a BMW."
Me too because I KNOW Honda could make a killer BMW clone. I love BMWs, but the 3 series is the only one that hasn't been ruined yet and German cars scare me. If not for sales, a true 3 series and Lexus IS competitor (nice try TSX) would do a lot to validate Acura's image as a sporty luxury car maker. If they can get away with selling hardly any NSXs, I don't see why they don't take a shot at RWD.
Several of their recent designs suggest that their track record of styling success may be brief. Design atrocities such as the new Maxima and the Quest are so ugly that they could wake the dead.
People will begin to tire of "in your face" for the sake of "in your face".
They took very un-Honda like shots with the S2000 and NSX, which are about as niche as you can get. Lexus and Infiniti seem to be doing OK with RWD cars. Where are the RWD cars Acura? If their FWD cars are that good, you KNOW the RWD cars would be knockouts.
Now the RWD market is more competitive, although the Germans have bumbled a bit.
There are short-sighted business reasons for Honda not to go into the RWD market. It's expensive to develop all those new platforms for one, and two Honda risks cannibalizing sales of its already developed TL and RL. Furthermore, whereas TL and TSX costs can be spread out over all the downmarket Hondas, Acura RWD cars do not get the benefits of downmarket cars to spread out costs.
In the long term, however, getting into RWD is a good move b/c once the initial development costs have been amortized, Honda can eat BMW's lunch for years of profits. Also, the domestics and Hyundai's expansion into the FWD economy car market is inevitably going to eat away at Honda's margins.
Honda is standing still while everybody else (especially Toyota) is moving forward.
Yeah, it probably made a lot more sense to go after BMW, MB, and Lexus than for Honda to build a Ferrari clone.
"It's expensive to develop all those new platforms for one, and two Honda risks cannibalizing sales of its already developed TL and RL. Furthermore, whereas TL and TSX costs can be spread out over all the downmarket Hondas"
What's the deal with the S2000 then? Develop a platform to be used for ONE vehicle that doesn't sell anywhere near typical Honda volumes?
That's what doesn't make sense to me. They spent money on a mid-engine wannabe Ferrari and a RWD Miata killer, but no RWD luxury/sport sedan???????
varmint: I was surprised that the Philadelphia Honda dealer noted weak sales for the Civic Hybrid. Philadelphia and its suburbs should be a decent market for the Civic Hybrid.