Honda Blames Inventory Woes for March Sales Slump

NEW YORK – Honda still is having trouble meeting consumer demand even though its plants are producing at capacity again, a top U.S. executive says.

A lack of inventory, or in some cases certain trim levels is to blame for the Japanese auto maker’s 8.4% sales decline last month, John Mendel, executive vice president-American Honda, tells WardsAuto in an interview here.

“As much as we did to fill the pipeline,” the auto maker couldn’t keep pace with demand, he says. “On some vehicles, we still have some (trim) mix problems which are hampering us.”

U.S. light-vehicle sales rose 8.7% in March, but Honda brand deliveries slid 7.7%, compared with year-ago, and Acura’s dropped 14.6%.

Mendel says March inventory was 65% of what it was a year-ago. WardsAuto data shows the auto maker’s total supply up 3.6% at the close of the month, compared with like-2011, to 244,477 units. But Honda inventory was down 14.8% to 220,086 units at the end of February compared with prior-year.

Mendel says Honda “had not counted on the industry (being) as strong as it is” when it made 2012 projections in January, but he still touts successes in meeting demand, including for the new CR-V.

The next-generation midsize cross/utility vehicle went on sale in December, and Honda in March set an all-time monthly record of 30,868 deliveries.

“(The) Pilot, Odyssey and everything else – we can’t keep up,” Mendel says. “We just can’t turn them fast enough. I have yet to see the turn rate from the dealers, but I would suspect it’s in the 50% range.”

In the case of Honda’s midsize Accord sedan and coupe due to be redesigned late this year, Mendel says too many higher-trim models are in inventory at a time when buyers are searching for lower grades.

“We know in the final year of a vehicle that lower trims sell better,” he says. “(But) as we came out of the earthquake and tsunami (in March 2011), what we could build were higher trims, so we built higher trims. Now we’re producing virtually 100% low trims that mixed in with the high trims is not quite at the balance we need.”

Accord sales fell 18.1% in March, WardsAuto data shows. The perennial No.2 best-selling midsize car in the U.S. behind the Toyota Camry, ranked fourth in first-quarter sales behind the Camry, Nissan Altima and Ford Fusion.

Mendel says sourcing fuel-efficient smaller Honda vehicles from Japan, such as the CR-Z and Insight hybrids, is an issue in meeting U.S. demand for such models. Both models saw deliveries plunge more than 60% in March from year-ago, WardsAuto data shows.

Although U.S. Civic sales in March dipped from year-ago’s 30,000 units, Mendel is pleased that more than 27,000 units were delivered. And Honda is ready to meet demand if gas prices again drive the compact car’s volume to a 50,000-unit level as happened in May 2008.

“I think we could, and we would end up in the same place we did in May of 2008: with no Honda Civics,” he laughs. But U.S. car buyers the second time around are more accepting of $4-a-gallon gas at the pump because the price rise has been slower. “I think people are a little less shocked now by fuel prices.”

Despite some analysts’ forecasts of gasoline rising as much as $6 a gallon this summer, pump prices appear to be retreating. A gallon of regular unleaded was $3.92 nationally on April 11, down from $3.93 a week ago, the American Automobile Assn.’s Fuel Gauge Report says.

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