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Honda’s deliberate path drives sales growth

If there’s one international automaker that can afford to show a little hubris, it’s Honda. The Japanese company is projecting continued sales growth in a likely dismal year for the industry.
Image: American Honda Automobile Operations Executive Vice-President Mendell and President and CEO of Honda Motors Co.
John Mendell, left, an executive vice president for American Honda, and Honda President and CEO Takeo Fukui introduce the redesigned Pilot in Detroit.Rebecca Cook / Reuters

Introducing a sleeker and more futuristic-looking prototype of its Pilot sport utility vehicle at this year’s Detroit auto show, Japanese automaker Honda sounded a note of optimism about the year ahead.

John Mendel, American Honda Motor’s executive vice president, told reporters he expects Honda to notch U.S. sales of 1.4 million vehicles this year, up slightly from 2007 and marking a 15th consecutive year of higher sales.

The forecast came amid whispers of an impending U.S. recession and continued difficulties in the U.S. housing market, and even as other top executives at this week’s media preview said they expect a challenging automobile market in 2008.

Even modest sales growth in a year that’s expected to see total U.S. vehicle sales decline 3 percent — the worst since 1998 — is commendable, but if there’s one international automaker that can afford to show a little hubris, it’s Honda.

The automaker could be called ascendant, boasting the most fuel-efficient fleet on U.S. roads and earning top marks in reliability studies, while its Accord sedan is the nation’s fifth-most sold vehicle, not far behind Toyota’s Camry and Corolla.

The key to Honda’s success is an abundance of caution, said Aaron Bragman, an automotive industry analyst at Global Insight.

“They move slowly with design, development and product growth,” he said. “They are very measured and they don’t take risks, and that is why you don’t see them having the same kinds of problems that Toyota is having with its expansion.”

It’s easy to compare Honda with Toyota, its Japanese rival that for years has enjoyed a reputation as the top manufacturer of reliable and fuel-efficient vehicles.

Toyota and Honda both started selling cars in the United States in the late 1950s, but Honda has often been overshadowed by Toyota.

But cracks have started to appear in Toyota’s armor even as it poised to overtake General Motors to become the world’s No. 1 vehicle producer. It has seen its reputation eroded by product recalls and slippage in consumer-quality surveys. Adding to Toyota’s woes are problems with its Tundra pickup — its first foray into the profitable U.S. truck market.

“There’s a perception-vs.-reality thing going on here,” said Karl Brauer, editor in chief at automotive research site

“Toyota has got a lot of mileage both figuratively and literally out of their Prius, and they’ve crafted a green image for themselves, but anyone who really understood the situation knew that the number of V8 engines Toyota was selling was vastly greater than the number of big-engined cars that Honda was selling,” he said.

“I have studied Toyota’s interiors in depth for some time and seen a slip in material quality,” Brauer continued. “The types of interior plastics they are using now in the Toyota Camry sedan gets scratched more easily, but I don’t think Honda has had that kind of slippage — their interiors are as good as they ever have been, and the recall and quality rankings have been as strong as ever.”

After years of top rankings, Toyota’s position in the widely followed Consumer Reports Annual Car Reliability Survey has slipped. Last year Consumer Reports said it will no longer automatically recommend new Toyota models as it ranked the automaker third behind Subaru and Honda in its study of almost 1.3 million consumers’ complaints about their vehicles. Another recent J.D. Power Initial Quality Study showed Toyota losing ground to Honda.

“The interesting thing about Honda vs. Toyota is [Honda has] fewer products that sell much better — it’s really hard to find a dog in their lineup,” said Tom Appel, editor of Consumer Guide Automotive, which offers buying advice to car shoppers. His publication recommends the Accord sedan, the Pilot SUV and the Civic compact as top picks.

“It’s interesting that when you look at Toyota they keep launching products, but some of them are not that popular — the FJ Cruiser, for example, and they had to throw lot of money on the hood of the Tundra truck,” he said.

As Toyota stretches itself to become a full-line automaker, Honda has pursued a more conservative strategy, avoiding trucks, for example, said Bragman.

“Honda is very conservative not only in the technology it employs in vehicle designs, but also in its manufacturing,” he said. “There are only a few only a few configurations of vehicles, so they’re able to manufacture these things easily. They have serious controls in their systems; it gives them serious flexibility.”

Still, Honda plans to expand its offerings in the fast-growing alternative-fuel market. The automaker plans to expand its hybrid vehicle lineup over the next three years, including a model priced below the Civic hybrid, and plans to introduce its i-DTEC clean diesel engine in the North American market in 2009. The engine cuts harmful exhaust emissions while boosting power and fuel efficiency and is expected to meet regulations in all 50 states, unlike diesel offerings from Mercedes and BMW.

And at last fall’s Los Angeles auto show Honda unveiled its new FCX Clarity, a sedan powered by a hydrogen fuel cell that Honda plans to begin leasing to a limited number of Southern California drivers this summer — the first fuel-cell car to be offered to the general public.

For now, Honda is set on competing for business in the extremely popular crossover SUV market with the next-generation Pilot, which will hit showrooms this spring. Although exact details were not released, Honda says the new, eight-passenger vehicle has a redesigned crossover SUV platform, improved fuel efficiency through fuel-saving cylinder management technology and extra legroom.

The current, boxy version of the Pilot, which made its debut in June 2002, is serious need of a redesign, said Bragman. New, popular crossovers like the GMC Acadia and the Buick Enclave have more curved rooflines to increase aerodynamics and raise gas mileage. Sales of the Honda Pilot fell 23 percent last year as the GM’s new Acadia and Enclave took away share.