Thursday, December 29, 2011

Ailing Honda hoping for a comeback

Ailing Honda hoping for a comeback
Justin Sullivan / Getty Images

A Honda dealer in San Rafael, Calif.

By Paul A. Eisenstein

Hammered by earthquakes, floods -- and some unexpectedly harsh reviews -- it hasn’t been a good year for Honda, which has seen both sales and profits plunge in recent months.

But the Japanese automaker is hoping to stem the tide of criticism and prove that it remains one of the most nimble and innovative of automotive manufacturers. Among other things, Honda has recently pulled the wraps off a broad array of new high-tech, high-mileage powertrains -- changes that a senior company official says will make Honda the fuel economy leader in every segment it competes in.

Meanwhile, Honda plans to unveil three new models at next month’s Detroit auto show that it hopes will help revive the flagging fortunes of the once-promising Acura luxury brand. That includes an all-new version of the legendary Acura NSX supercar -- but using an innovative, three-motor plug-in hybrid powertrain.

It’s clear that Honda needs a hit. The new 2012 Civic has taken some sharp criticism, notably from the normally import-friendly Consumer Reports magazine. And it isn’t alone, admits Tetsuo Iwamura, CEO of American Honda.

“Some of the sales results [for recent new models] have been quite a disappointment,” he said.

There have been a variety of problems, but what has been particularly surprising has been Honda’s continued dependence upon what critics contend is outdated powertrain technology.

The Japanese automaker has often billed itself as an engine company that also happens to make cars. But consider the newly updated CR-V crossover-utility vehicle. Here -- as with a number of other recent models -- Honda seems to have taken a “good enough” approach, opting for port fuel injection and a five-speed gearbox where much of the competition has migrated to advanced direct injection or turbo engines mated to six, seven and even eight-speed transmissions.

Blistered by such criticism, Honda revealed an unexpectedly broad array of powertrain technology at this month’s Tokyo Motor Show. Toshihiko Nonaka, head of global automotive R&D operations for the carmaker, declared that the automaker aims “to become number one in all categories of fuel economy within three years.”

Expect to see a variety of new direct-injection gasoline engines from the number three Japanese automaker, ranging from a 1.5-liter I-4 for the likes of the little Fit, up to a 2.4-liter for that we’ll be seeing in the next-generation Honda Accord – a concept version debuting at next month’s Detroit auto show. It promises to deliver near-V-6 power but notably better mileage.

Honda is also working up an assortment of green engines, such as a new diesel that should deliver hybrid mileage -- or better -- plus hydrogen, CNG and new battery-based drivetrains.

One of the more intriguing is a plug-in hybrid version of its current Super Handling-All-Wheel-Drive system. A V-6 gas engine serves primarily as a generator, sending power to a single electric motor on the front axle and two separate motors in the rear. That approach allows the SH-AWD to torque vector; in other words, to deliver different amounts of power to each rear wheel to help steer precisely through a corner.

The Electric SH-AWD system will show up on the next-generation Acura MDX crossover, a high-performance version earmarked for the reborn Acura NSX.

Acura has been a particular headache for Honda. The first of the high-line Japanese brands, Acura has become something of an also-ran in the luxury market, especially when compared to Toyota’s Lexus and Nissan’s Infiniti.

“The reality is while Acura started out as a luxury leader we didn’t capitalize on our brand,” acknowledged Jeff Conrad, vice president of Acura Sales.

With the upcoming Detroit auto show, Honda hopes to kick start the struggling brand. It will introduce not only the new NSX and an updated RDX crossover, but also launch the all-new ILX, a compact BMW 3-Series competitor that Acura hopes will help it draw in a new generation of Millennial buyers who are just reaching the point when they can begin migrating to luxury cars.

The next-generation Acura products will bring a shift in styling, all but abandoning the highly controversial “shield” grilles that alienated critics and potential buyers alike. Vicki Poponi, assistant vice president of product planning, concedes that “we pushed the envelope too much with our styling direction.”

That’s not to say the goal is to go back to bland. Anything but, Poponi said during a small background session during which she revealed the striking new ILX and NSX prototypes.

Skeptics remain. Notably, Acura will maintain its confusing alpha naming strategy and not return to more familiar names like the once-popular Legend line. But Honda officials are convinced that by broadening the luxury brand’s line-up, adopting more advanced technologies -- and reintroducing a halo car like the NSX -- they can regain a spot in the luxury top tier.

As for the mainstream Honda brand, it will also count on new powertrain technology, revised styling -- and aggressive marketing -- to turn things around.

The good news for the carmaker is that it has largely moved past the hits from the March 11 Japanese earthquake and tsunami and the Thai flooding that led to further production cuts. According to American Honda CEO Iwamura, dealer inventories are rapidly getting back to normal.

But Honda has a lot of ground to make up. After years of gains it has lost about 1.5 points of market share in the U.S. alone this year. And its problems extend around the world.

First, there's the strong yen, which makes exports from Japan relatively more expensive. Then there's the slump in Honda’s global earnings, which declined 55 percent during the most recent quarter -- with few prospects for any near-term upturn.

Few automakers have had a more successful run than Honda over the years. But the company is now facing more challenges than ever. It will be a test of corporate will to turn things around.


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