Honda Insulated By Devotion To Small Cars

Honda HybridHonda may be the one major automaker selling in the U.S. that doesn't have wounds to lick this year. While other automakers--from mass market to luxury--suffered dearly as the U.S. economy sank and gasoline prices went through the roof, Honda seemed to float above it all like balsa wood in a typhoon.

One reason is Honda's devotion to small cars, car-based trucks and small engines under the hood. While most other automakers gnashed teeth in the first and second quarter this year, Honda posted record sales as consumers rushed to buy Civics and Fit cars.

In May--Honda's best-ever sales month in the U.S.--Civic sales hit a record of over 53,000 vehicles. Civic sales of around 40,000 in June (the company's best-ever performance for the month), and around 30,000 in July reflected tight supply, not soft demand: The company was sold out of the cars, per Dick Colliver, EVP of the Torrance, CA automaker.



When Colliver spoke at the Center for Automotive Research's Management Briefing Seminars last week, he opened by acknowledging just how far the market had fallen. "I've been in this business for more than 45 years...but this is the first time in my career when I didn't have a clear idea about whether our efforts to stimulate sales will work," Said Colliver, at the Traverse, MI event.

What has worked for the company, he said, is a slow, steady, stubborn U.S. growth strategy. An approach "more like the tortoise than the hare," he said, that has kept Honda's growth rate at about 2 to 3 percent, and focused on cars and crossovers versus trucks and truck-based SUV's, regardless of market conditions.

"Sure, we've taken some criticism in the past ... for not expanding into larger trucks and V8 engines. But these were strategic decisions based on our values and forward-thinking vision," he said--adding that when truck sales became 50% of the market in the 1990's, and fed massive profits at the Big Three, and lured Toyota to expand in that direction, dealers wanted V8 pickup trucks and body-on-frame SUVs.

Colliver said that the net effect of economic, environmental and purely psychological reasons driving consumers' shift to more fuel- efficient green cars is that consumers are now "streamlining" their decision-making process. He said half of the buyers for Honda Civic vehicles purchased their vehicle after being in the market for less than four weeks.

Thus, he said, Honda will shift production mix in the U.S. and Canada to favor Civic. Also, next spring Honda will launch the first of a range of new hybrids: a new 5-door, 5-passenger hybrid car priced below the current Civic Hybrid, and with a sales target of 100,000 units.

The company this fall will boost Civic sedan production when it opens its second U.S.-based auto plant in Greensburg, IN. Colliver said the company will also boost Civic production in Canada and Ohio this year.

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