By James R. Healey and Chris Woodard, USA TODAYIt must presage a new Civic good enough to prove that Honda (HMC) still has the touch, that it can still roll out cars that make buyers willing to wait in line and pay more than sticker price.
The once-golden car company hardly is a disaster, but it has been drifting in the U.S., unable to capitalize on rival Toyota's recall-fueled slide, losing ground to Ford (F) and Hyundai in the hearts and minds of buyers, and unable to fire anybody's imagination with recent launches of low-volume specialty cars that don't quite make sense to buyers.
"They need a hit," says Ed Kim, director of industry analysis for consultant AutoPacific. "Honda no longer has the edge. In efficiency, technology and design, they are no longer the leader."
Details remain secret, but Honda is promising that this ninth-generation Civic will be "completely revolutionized" and will raise compact-car standards for innovative technology.
Civic is "hugely important to us" and "the emotional pivot point" of the brand, says John Mendel, Honda's executive vice president in the U.S.
Civic is Honda's second-best seller, behind the larger Accord sedan, and in some months has passed Accord. Civic was the sixth-best-selling vehicle of any kind in the U.S. last year and is the car that introduces many buyers to Honda. U.S.-market Civics are made in Ohio, where thousands of jobs depend on the car's success. And the small-car segment overall, in which Civic is a main player, makes up about one-third of all U.S. car sales. The small-car category is expected to grow as buyers seek lower prices and better fuel economy.
What's more, if the new Civic misses the bull's-eye, even after being delayed a year to help Honda save cash during the recession, then a struggling Civic becomes both harbinger and symbol of Japanese-brand automakers struggling to rediscover their magic. For decades, Japanese-brand car companies "had the corner on the small-car market. The domestic offerings were not at the same level, did not provide the same quality, value, reliability," says Rebecca Lindland, auto-industry specialist at consultant IHS Global Insight.
"That's changed a lot. We're seeing products coming out" of General Motors (GM), Ford Motor and Chrysler Group "that are incredibly competitive. For example, Chevy Cruze and Ford Focus."
Honda's share of the market was 10.6% last year, down from 11% in 2009. But Mendel points to data showing that competitors gained ground by cranking up heavily discounted bulk sales to corporate and government fleets and rental car agencies, low-profit sales that Honda eschews.
What's going on at Honda
Consequently, he doesn't think Honda has lost its Midas touch. "I don't think there's a mojo deficit at all," Mendel said in an interview at the automaker's U.S. headquarters in Torrance, Calif.
Whatever malaise might be stalking American Honda — the U.S. operation that includes the Honda mainstream brand and the Acura luxury brand — is tricky to define.
"I don't sense that there's a dynamic excitement any more," Lindland says. "It's nothing definitive." But the Honda brand's U.S. sales of 1.1 million last year fell short of the 1.2 million that IHS Global Insight had forecast a year ago.
Honda's main Japanese-brand rivals, Toyota (TM) and Nissan, will be relatively weaker competitors until they redesign their Corolla and Sentra, respectively. A mildly refreshed Corolla is just hitting showrooms; Toyota hasn't said when a full redesign is coming. Even though aging, Corolla still outsold Civic by 5,864 units last year. A new Sentra is about two years off, though Nissan plans to unveil another small car at the New York auto show in April.
There could be room for all. A combination of higher gasoline prices and the new small-car entries are expected to boost compact cars to 15.7% of all new car sales, up a percentage point from last year, predicts J.D. Power and Associates.
J.D. Power analyst Jeff Schuster is encouraged about the new Civic. "It looks like it will be a more sporty vehicle that should do well in the segment," he said.
While most Civic buyers match the demographics of the rest of the compact segment — 51, probably no kids at home, mainly interested in reliability and fuel economy — the car's sportier engines and suspensions have lured more driving enthusiasts than rivals have. Young and loyal, they are an important core for Civic and Honda.
Jeff Palmer, who founded the Temple of VTEC website for Honda enthusiasts, is praying the new Civic stays sporty and continues to be "a great car."
Civic, of course, could be a wild hit. Honda "might have a tiger by the tail there. Sometimes you introduce at just the right time," says Jack Nerad, executive market analyst for Kelley Blue Book, mainly known as a source of real-world auto pricing and consumer research.
Toyota taint
But Honda has faced troubles because of Toyota's recalls in the past year. Toyota, the top Japanese car company, recalled more than 7 million vehicles for just two problems — improper floor mats and sticky acceleration pedals — that could cause runaway acceleration. Other high-profile recalls involved such frightening issues as potentially faulty brakes. The government imposed two $16.4 million fines against Toyota — the maximum possible — for not reporting the floor-mat and sticky pedal issues promptly. And it separately fined Toyota another $16.1 million for tardy notice of nearly 1 million vehicles with potentially faulty steering relay rods that had been recalled earlier.
"Toyota's trouble didn't benefit Honda," AutoPacific's Kim says. "A lot of those people ended up (shopping for) a Ford for the first time, or a Hyundai the first time." Honda's Mendel says,"We never targeted to take advantage of" Toyota's troubles. "It's not how to win a race."
Instead, Honda focused on its own new models, which Mendel says are hitting sales expectations. Some, though, have seemed out-of-sync with the market:
•CR-Z. The two-seat, gas-electric hybrid was dinged last month by influential Consumer Reports magazine. CR said, "Even if the CR-Z turns out to be reliable, it scores too low for us to recommend."
The publication cited "a long list of drawbacks" that included stiff ride, poor steering feel, poorly tuned stability control, and "lousy" visibility.
•Insight. Also a hybrid and the car on which CR-Z is based, the Insight is aimed directly at Toyota's Prius and was criticized by CR and others for a cheap interior, mediocre mileage (by hybrid standards) and a noisy powertrain. Honda sold just 21,000 Insights last year; Toyota, 141,000 Priuses.
•Accord Crosstour. Fitted with all-wheel drive, sloping rear roofline and a premium price, this Accord is somewhat modeled on the BMW X6 crossover, but without BMW's "sport-activity vehicle" panache.
•Acura ZDX. Another attempt to blend crossover-utility-vehicle underpinnings with a fastback-sedan body.
Acura spokeswoman Alison Sobkowski points out that ZDX is meant to be a niche player to enhance Acura's image. She says the brand overall had a good sales year. Its 134,000 sales exceed IHS Global Insight's year-ago forecast of 124,000. Acura should benefit because its models are lower-price than better-selling import rivals at a time premium-car buyers are seeking value.
Acura also scores high in quality and reliability rankings by third-party evaluators, such as CR and J.D. Power and Associates.
Unfriendly dealers
Honda dealers as a group typically score in the bottom third in J.D. Power's annual Sales Satisfaction Index, a survey of how well new car buyers were treated at the dealership. Last year, for example, Honda dealers as a group were 23rd among 32 brands for which Power had sufficient data. The year before, 25th of 37. The pattern holds all the way back to 2001. As buyers begin to see there are more and more choices, tangential issues such as pleasant dealerships matter more.
Eroding forte
Honda began as an engine-building company and made vehicles simply as a way to package and profit from its engine expertise.
"They are still a very, very good engine company," Lindland says.
But Hyundai is equipping its latest vehicles with ever-more-efficient and sophisticated four-cylinder power plants. And Ford has a unique selling proposition in its EcoBoost engine line: Those increase power from small engines without sacrificing significant mileage, by using a combination of direct injection and turbocharging.
"The big question for the next Civic: Is it going to be another innovative car, or is it going to be one of the 'safe' Civics?" says AutoPacific's Kim. "Honda has an opportunity to get it" right.
Source;http://www.usatoday.com/money/autos/2011-01-07-autoshow07_CV_N.htm
