Acura Bids for ‘Tier 1’ Status
By Tom Murphy WardsAuto.com, Jan 15, 2008 2:06 PM

DETROIT – When Honda Motor Co. Ltd. created its Acura brand for the U.S. in 1986, the auto maker did not intend for it to compete directly with established luxury players.

Instead, Acura would serve as an “intercept brand” for Honda customers looking for a “near-luxury experience,” says John Mendel, American Honda Motor Co. Inc. executive vice president. Before Acura, those customers would have been considering more expensive European luxury brands such as Volvo, BMW or Mercedes-Benz.

That strategy soon will come to an end as Acura attempts to reposition itself to compete more directly in the luxury sector, Mendel says, with the first attempts coming after the debut of the next-generation NXS supercar in 2010.

“For the first time, we’re now ready to take Acura to Tier 1,” he tells journalists at the North American International Auto Show here. “This involves the retail network, the product and, frankly, our mindset as an organization.”

Acura desperately needs a new plan as it lags the rest of the luxury field, particularly Japanese rival Lexus, a division of Toyota Motor Corp.

Last year, Acura sold 180,104 vehicles, down more than 10% from 2006, according to Ward’s data.

Meanwhile, BMW sold 335,840 vehicles (up 7%); Lexus, 329,178 (up 2%); Mercedes, 253,218 (up 2%); and Cadillac, 214,727 (down 5%).

John Mendel, American Honda executive vice president.

Even Buick, whose 2007 sales fell 23% from prior-year, delivered more vehicles than Acura (185,791).

Mendel says the plan to revitalize the brand has been in the works the past few years.

“There is a dedicated and renewed effort among the Acura franchise for both product and dealers and for, ultimately, the customer,” he says. “There’s a lot of study around what the luxury customer wants – how they want to be treated; how they want to be catered to – and it’s around the ideas of speed, flexibility and knowledge.”

In April, Acura management will lay out more of the strategy in a meeting with its 253 U.S. dealers, but the tactic will not hinge on a particular new model in the future, Mendel says.

“It won’t be any one big bang,” Mendel says of the plan. “You can’t build a brand on one product, although our success or failure rides on the products. As we replace vehicles in the lineup, you will continue to see more and more of that strategy rolling out.”

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Mendel says future Acura vehicles are likely to integrate the Variable Cylinder Management system now available on other Acura and Honda offerings, including the upcoming ’09 Honda Pilot cross/utility vehicle.

He declines to be specific on a timeframe, which may be longer than anxious dealers would like.

“By the time we get to an NSX replacement – a year or two beyond that – I’d love to sit down and talk to you more,” Mendel says. At the 2007 Detroit show, Acura unveiled its Advanced Sports Car concept, which hints at design cues of the future NSX.

Meanwhile, Mendel says it “will continue to be difficult” to sell large vehicles in the U.S. as the new corporate average fuel economy legislation mandates 35 mpg (6.7 L/100 km) by 2020, but he believes Honda will succeed.

It is too early to predict Honda’s fleet mix between cars and trucks by 2020 and whether the auto maker will sell fewer Ridgeline pickups, Odyssey minivans or Pilots – all of them powered with gasoline V-6s.

“If you took a diesel engine and put it in one of these (large) vehicles and got a 30% to 40% increase in fuel economy, that’s a big step,” Mendel says. “We’ll have diesel.”

Honda officials have not yet identified which vehicle will be the initial recipient of its long-awaited 4-cyl. turbodiesel, but CEO Takeo Fukui tells journalists here the engine first will appear in an Acura vehicle in 2009. A V-6 turbodiesel also is in the works.

Meanwhile, Mendel gives credit to Smart USA for launching the 2-seat Fortwo city car in the U.S. this year.

“I still think (the) Smart makes a lot of sense for the cities,” he says. “I’ve driven (the) Smart, and it’s a great car. But I still get a little nervous on (Interstate) 405 (in Southern California), with all the traffic doing 70 to 80 mph (112 to 128 km/h).”

Similarly, Mendel says India’s Tata Motors Ltd. should be taken seriously with its $2,500 Nano, although he says the subcompact’s prospects for the U.S. remain tenuous.

“To come here as a mainstream vehicle? I can’t really see it running up and down the Lodge (freeway in Detroit),” he says. “I think it’s a specific niche vehicle.”

However, Tata’s growth as an emerging auto maker cannot be ignored, he warns.

“Anybody who really discounts new entrants or new ideas does so at their peril,” Mendel says, recalling U.S. reluctance to recognize Japanese or Korean offerings as competitive. “Being a judicious student of the industry is important.”

tmurphy@wardsauto.com