Rough Year Even for Honda

For American Honda Motor Co. Inc., 2006 will mark a return to its roots.

Next spring the auto maker will flash back to the 1970s, returning to the subcompact market with the Fit, a European-market B-car tweaked for American tastes. Honda helped pioneer the segment in the U.S. with the Civic in 1973.

By contrast, last year Honda launched its largest vehicle yet, the Ridgeline compact pickup truck. Since its March launch Honda has had to defend its first-ever pickup due to slower-than-expected sales.

Deliveries improved later in the year, however, and it appears Honda will hit the 35,000 to 40,000 sales it forecast in January for 2005.

While Honda and Acura brand sales maintain momentum in the U.S. — up 5.4% through October to 1.2 million units — a slow start for the Ridgeline and rare monthly sales dips early in 2005 for the Accord and Civic emerged as uncharacteristic bumps in the road.

Through October, U.S. sales of North American-built Civics were down 6.6%, compared with a 2% increase for the Accord, according to Ward's data.

“I can't remember when it wasn't really a rough year,” John Mendel, senior vice president-automobile operations, says of 2005.

Mendel, a self-professed “worrier,” earlier this year replaced long-time American Honda Executive Vice President Tom Elliott, who retired.

“I believe it's constantly good to be paranoid,” Mendel says. “If I'm not worried about Toyota (Motor Corp.) or the Koreans, I'm worried about the Chinese. I think that sets up a pretty good framework for how you need to operate.”

And he worries about Detroit.

“I'd rather see GM healthy. I'd rather see Ford healthy,” says Mendel, a former Ford executive. “It's hard on the industry when you've got competitors that are in crisis. It's not good for our business.”

Mendel began his automotive career with Ford in 1976, holding positions mostly in sales and marketing. He last was at Mazda North American Operations, where he held the position of executive vice president and chief operating officer.

Before his arrival at American Honda, Mendel says he had “a good general high view of what Honda was about” because his previous employers benchmarked Honda's manufacturing, product development and sales policies.

“What I didn't know was the philosophy that drove those practices, and I've spent the last year getting a much better understanding of the heart and soul that drives (this company),” he says. “And it's exceeded my wildest expectations.”

Mendel cites Honda's quiet leadership. “You never see them on a podium declaring next year's sales successes in advance, or how great they are.”

But he says the auto maker needs to be more “up front” in touting its products and technologies.

Mendel cites a study identifying GM as the leader in hydrogen powertrain technology.

“We're still the only manufacturer that's actually delivered a hydrogen vehicle (an FCX) to a customer,” he says. In June, Honda leased its first FCX fuel-cell vehicle to a California couple for two years.

“Even though you try to take a position of quiet leadership, there are those times when you need to come out and help that along a bit,” he says. “So I think we can probably be a little bit more up front.”

In addition to the Fit, targeted at 50,000-60,000 units annually, a revamped CR-V cross/utility vehicle will go head-to-head with the third-generation Toyota RAV4, and an all-new Acura RD-X small CUV built off the CR-V platform will enter the market.

Mendel confirms that in the near future Honda finally will debut an Acura hybrid-electric vehicle that will improve fuel economy while upholding the Acura brand image.

Given the recent inflated fuel prices in the U.S., Mendel says Honda currently is “in a pretty good position” with the highest corporate average fuel economy rating in the U.S.

Honda also will play up its safety record of vehicles with the most 5-star crash-safety ratings in the U.S.

“So those two things — fuel economy and safety — put us in a pretty good competitive light when people start looking beyond employee purchase plans or rebates or those kind of things,” says Mendel.