TORRANCE, CA – The growth in U.S. automotive sales may have slowed to a crawl in 2004, but there is no black crepe hanging in American Honda Motor Co. Inc. showrooms.

"We expect total U.S. sales this year will be close to 17 million units, a little better than 16.9 million in ’04,” says American Honda Executive Vice President Tom Elliott. “Short term, the U.S. market may be somewhat saturated. But not long term."

"Seventy-five to 80 million young people are getting to or near the driving age, ready to enter the car market,” he says. “Prices are low, and more choices than ever are available. The market will grow to 19 or 20 million units some time in the future, but that's not to say we won't have peaks and valleys."

Elliott rules out any need to reduce North American production, saying Honda will sell 1.4 million vehicles in the region this year, up 3.7% from 1.35 million in 2003.

Tom Elliott

“We're introducing some really nice new products – the Odyssey, Acura RL and Accord Hybrid this fall, a sport/utility truck (Ridgeline) next spring and more new products for the ’06 and ’07 model years."

Honda sales projections for next year are not yet public, but Elliott hopes national leaders will focus on improving the economy and give automotive sales a boost.

Asked where he foresees the most action in coming months, he suggests several new entries will spur growth in minivan sales and anticipates increased SUV sales.

"They're not dead or dying yet,” Elliott says of SUVs. “More manufacturers are coming out with new models, and crossovers are a new generation of SUVs. Just as the van market changed and went from truck-based to car-based, SUVs are going the same way."

He also notes reborn efforts to get back into the passenger-car business. “The Big Three are introducing a lot of new ones, and some, like the Chrysler 300, are quite interesting," Elliott says.

Light trucks – 56% of total industry sales in October – are "a trend that shows no sign of stopping," he says. "It really depends on what you consider a light truck. The regulations are so easy that you can call almost anything a light truck if you want to."

About 40% of Honda’s U.S. sales are light trucks, up from zero 10 years ago, and the company is moving deeper into that market with the launch next spring of the 4-door Ridgeline SUT.

Elliott considers the vehicle "a toe in the water. This is our first foray into the pickup truck (market), but I'd be crazy to think it would be our last."

The company is hoping to sell 60,000 Ridgelines in the first 12 months, initially to Honda loyalists, next to "import pickup intenders" – those who will check out Honda, Toyota Motor Corp. and Nissan Motor Co. Ltd. offerings when they buy their first pickup – and a third group who know Honda's reputation.

Elliott says the Ridgeline SUT cannot accommodate a V-8, and he does not foresee a hybrid version. But the addition of the Accord to the Civic and Insight in the auto maker's hybrid lineup will not be the last.

"We're looking at the Acura side for sure and at other Honda models, but they tend to be on the SUV side." He acknowledges it will be a long time before hybrids capture significant market share but nonetheless sees growth opportunities. Next year, Honda expects to sell more than 50,000 hybrids, up sharply from 30,000 in 2004.

Elliott views fuel-cell power as a distant prospect, at least 15 to 20 years away from commercial introduction, but expects auto makers to offer a diverse range of alternative-fuel products to yield cleaner engines. For example, next year Honda will begin selling a home re-fueling device for compressed natural gas.

"The gasoline engine still has a future," insists Elliott. "We probably lead in the area of low-emission products, and we're expanding the number of partial-zero-emissions vehicles (PZEVs)."

Safety also fits into Honda’s marketing equation as the company strives to improve its vehicles. Elliott says by the end of 2006, every Honda product, from the most expensive to the lowest priced, will have antilock brakes, side curtain airbags, Vehicle Stability Assist and other safety devices.

Elliott says the new, upscale Odyssey minivan launched in October and a new Acura cross/utility vehicle (smaller than the MDX) due out in 2006 will be popular additions to the luxury market, where he expects continued growth.

"When Acura was introduced in 1986, the luxury-vehicle segment was only about 10% of the U.S. market,” Elliott says. “Now it's more than 15% and getting close to 18% in some areas."

But he says definitions have changed. In earlier years, luxury models sold for $25,000-$50,000. Today, a mid-priced car costs $25,000, and 75% of luxury models are in the $30,000-$60,000 range.

He expects demand in this segment to peak at around 20% of the market because, "once you get past $60,000, there's not a lot of business."

Elliott identifies Honda's keenest competitor in North America as Toyota, "model line by model line." Consumer cross-shopping with Nissan so far is limited mainly to the Altima against the Accord, while the Korean makes merit careful watch now that the low end of the market commands more attention.

"We recognize there's a growing number of people looking for a product priced below the Civic, which sells for $17,000-$18,000,” Elliott says.

“So in 2006 we plan to bring in a model below the Civic, something selling for $14,000-$15,000, not to go head-to-head with the Koreans but to have a presence in the true entry-level market and permit people to join the Honda family at a lower price."

He declines to say from where the new model will be imported, but reports have indicated it will be based on the Fit model from Japan.

Incentives, now endemic in North America, are making marketing all the more difficult.

"Incentives are driving a lot of the market, and we are a reluctant follower," admits Elliott. "With some auto makers offering $5,000 to $6,000 off, it's a little difficult if you offer nothing. So strategically, we have some incentives from time to time, but ours are among the lowest in the industry, generally in the $500 range, just enough to keep us competitive."

Marketing at Honda is being helped some by cutting the time between dealer orders and vehicle deliveries.

"Our first goal was to get 100% of our products down to a 30-day lead time and we're getting close, about 80% today. After that, we'd like to have a significant number delivered to dealers within two to three weeks," says Elliott.

"And we're working to reduce dealer inventories to a 40-day supply or less. The industry traditionally has worked with a 60-day supply. We're probably down in the 45-day range now, on the ground and in the pipeline."

Elliott says the auto maker’s main problem is the sluggish U.S. economy. Likewise, health insurance is becoming a concern, with a greater percentage of operating costs covering benefits. But Honda considers health care, valued so highly by workers, an unavoidable cost of doing business.

Elliott foresees no political backlash against foreign auto makers as General Motors Corp., Ford Motor Co. and Chrysler Group struggle to maintain market share in North America.

"Most people realize the automotive business is global, and no one wants to start a trade war,” he says. “Eighty percent of what we sell in North America is produced here, and local content is in excess of 90%. We consider ourselves as good an American company as any."

To date, Honda has invested more than $8 billion in 12 factories and other operations in North America, including assembly plants in the U.S., Canada and Mexico.

North America is the company's most important market, accounting for about half of worldwide sales and substantially more than half of worldwide profits, despite foreign-exchange fluctuations.

Yet Elliott says Honda is becoming less dependent on North America now that the Japanese market is rebounding, the Asian market (including China) is very strong and Honda is making money in Europe.

This year, Honda celebrates its 25th anniversary of production in North America, which began in a $30 million motorcycle plant in Ohio in 1979 (and was followed three years later by the first car production, also in Ohio.) (See related story: Honda: Made In The U.S.A.)

U.S. Honda managers make no prophesies about the future, but they expect to do as well – or even better – in the next 25 years. "There are still many market segments we're not in and lots of opportunities,” Elliott says. “The company intends to grow."