Honda Motor Co. Ltd. executives don’t cite the fable of the tortoise and the hare when discussing the company’s future, but the story seems apt.The automaker, with the bulk of its U.S. production in Ohio, has seen some bright spots in 2010, including improving sales. It has also encountered troubles, including three recalls involving nearly 1 million vehicles and an inability to convert schadenfreude to sales following the larger woes of competitor Toyota Motor Corp., which has recalled more than 7.3 million cars and trucks this year.
But to John Mendel, executive vice president at sales arm American Honda Motor Company Inc., and Bob Nelson, North American purchasing manager with Honda of America Manufacturing Inc., those are short-term hurdles for a company focused on the long race. And how the company responds is critical to the 13,500 workers it employs in the state.
“Difficult times make us all smarter,” Mendel told Columbus Business First before addressing a transportation conference at Ohio State University on May 3.
Staying sharp
Honda struggled in 2009. Still, it fared better than most competitors, Mendel said. He noted the car maker is headed into the coming years adhering to the same tenets that carried the business in the past – focusing on the customer and producing affordable, reliable vehicles.
Honda projects North American sales to rise 14 percent to 1.5 million vehicles this year from 1.3 million sold in the year ended March 3. Mendel acknowledged industry turbulence has improved rivals, particularly the Detroit Three, which plan to build the smaller, fuel-efficient vehicles that have been Honda and Toyota strengths.
According to Automotive News, Toyota and Honda lost market share in the first quarter – a 1.2 percent decline for Toyota and a 0.4 percent drop for Honda. Ford Motor Co., General Motors Co., Nissan Motor Company Ltd. and Volkswagen AG all gained. And Korean automaker Hyundai Motor Co. has gained on the Japanese leaders in recent years.
“A faster track helps the industry,” Mendel said. “It keeps us on our toes.”
Upcoming additions to Honda’s lineup include a wagon built on the Acura TSX chassis, similar to the new Crosstour that is assembled in Marysville on the Accord platform. Also planned are updated Civic and Odyssey designs, a CR-Z hybrid and a four-door Acura ZDX coupe.
Competition may be threatening from all sides, but Toyota remains Honda’s biggest rival. To power sales amid its recalls, Toyota hiked its purchase and lease incentives in March. It resulted in a 41 percent sales boost for the month, with April sales rising 24 percent over a year earlier.
Both increases trumped Honda’s gains. But where some industry observers saw a missed opportunity, Mendel questioned the depth of the opportunity pool. Incentives, he said, were not the whole story. Loyal customers who bought into Toyota’s image long ago came to its rescue, he said.
“Many Toyota owners already have rejected Honda for whatever reasons,” he said. “They’re less likely to switch over.”
Managing inventory
Honda has been reluctant to depend on incentives to drive sales, and industry upheaval hasn’t changed its mind. Incentives are a tactic, not a strategy, Mendel said. The company uses them to cut the inventory of vehicles with redesigned models about to be released, but otherwise it isn’t as aggressive as others. It offered some lease deals in response to Toyota’s incentives, but otherwise has avoided reduced financing rates and cash-back offers.
“We’d rather flex our manufacturing than incentivize the vehicle,” Mendel said of Honda’s method to manage it inventory.
Flexibility is a Honda hallmark, but even it and its suppliers struggled with inventory balance in 2008 and 2009. Employment and work hours fluctuated in both years, most notably as sales of the Marysville-made flagship Accord stalled and cars filled up lots.
There were lessons learned, Nelson told Business First after the company’s annual supplier conference April 29. “The fast-changing environment exposed some of our weaknesses,” he said.
Honda is working to eliminate product problems prior to mass production, which means working with suppliers earlier in design and planning.
Nelson said there was attrition in Honda’s supplier ranks, but they were comparable to regular fluctuations in the supplier base. The most turnover comes at new model years, he said, when new technology and features create opportunities for new suppliers.
Source;
http://www.bizjournals.com/columbus/stories/2010/05/10/story4.html?b=1273464000%5E3317951