Samson

Sales slumping far behind Toyota in home market Reshuffling of top management also a concern


YURI KAGEYAMA
ASSOCIATED PRESS

TOKYO—Honda Motor Co. has racked up its best profits in a half century of existence and quality rankings to die for.

So why is Honda's former president calling the Number 2 Japanese auto maker "inferior" and "headed downhill?"

Nobuhiko Kawamoto, Honda's president from 1990-98, said earlier this month he felt "a sense of crisis" because Honda has to compete with Toyota, Japan's top auto maker. Kawamoto, who now acts as an adviser and director at Tokyo-based Honda, also is concerned about a reshuffling of the company's top management.

Despite booming sales in the United States, where Honda makes 60 per cent of its sales, business is plunging in Japan, a notoriously finicky and brand-conscious market. And the tide of strong sales is expected to turn soon in North America, where purchases have been inflated by rebates and other discount campaigns.

Honda president Hiroyuki Yoshino announced his resignation last month, earlier than expected, in what was widely interpreted as a concession of a need for younger leadership.

Yoshino, 63, said he was getting too old and insisted his hand-picked successor, 58-year-old Takeo Fukui, the former head of Honda's North American manufacturing operations, should steer the auto maker's three-year strategy that is being set up this year.

Kawamoto said the timing of the change wasn't right, and that Yoshino should have waited until Honda was back on a path toward steady growth before handing over his job.

Kawamoto said he was worried about Fukui's ability to maintain strong morale among his workers to keep up with Toyota, which has twice as many workers and dealer showrooms as Honda. Toyota controls 42.3 per cent of the Japanese market to Honda's 15 per cent. Toyota also has a wider variety of models.

"We're an inferior company compared to established companies like Toyota," he said. "Honda is headed downhill."

Honda clearly is outmuscled by Toyota, the world's third-largest auto maker. Toyota has ambitions of controlling 15 per cent of the global market by 2010, which would put it neck-and-neck with Detroit-based General Motors Corp., the Number 1 auto maker in the world.

Honda appears particularly small next to its rivals at a time when auto makers have been merging or forming alliances to boost profits by producing more cars.

Besides Toyota, Honda is the only Japanese auto maker that has avoided stock-ownership alliances with foreign auto makers. Yoshino said fighting to maintain Honda's independence had been his biggest achievement during his tenure.

Kawamoto is concerned that Honda won't be able to keep up its recent solid performance. The auto maker posted the best-ever profits in its history for the fiscal year ended March 31 of 427 billion yen ($5 billion (Canadian). That was an 18 per cent increase from the previous year.

And Honda scored higher than U.S. auto makers in a key quality study this month of 2003 models, trailing only Toyota, Porsche and BMW in the annual report from J.D. Power & Associates.

Honda's management is more confident than Kawamoto.

"Technology is what got us this far so it will be technology that we'll be counting on under Fukui," Honda chairman Yoshihide Munekuni said. "He is the kind of man that clearly moves toward his goal. A company should never lose its youth and vitality."

But this year is almost certain to be tough for Honda. Besides an expected slowing of North American sales, Honda's business stands to be hurt by the falling U.S. dollar, which reduces the value of its overseas earnings. The dollar has dropped below 117 yen, reflecting a belief among traders that the United States favours a weak dollar to help its own exports.

And Honda is struggling at home. For the quarter ended in March, Honda sold 221,000 vehicles in Japan, down 10.5 per cent from the same period a year earlier.

The Toyota Wish minivan and Corolla sedan clinched the top best-selling spots in the Japanese market in April, dethroning the Honda Fit, which had been Number 1 for nearly all of last year.

The Fit, which is not sold in North America, won Japanese buyers with its superior fuel economy and roomy interior.

"The Fit effect has peaked out," said Hitoshi Onishi, auto analyst at Cosmo Securities Co. in Tokyo. "Producing hit after hit is just impossible to sustain."
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kazi

This article from last month, does deminish the idea that Honda is 'inferior'. There is a big management change at Honda, but one executive saying its 'inferior' is overblowing the situation if you look at the whole picture. Honda is losing steam in Japan, BUT worldwide sales still remains very strong. Yes, its homeland sales, but Japan sales only constitute probably about 10% of its global sales. Also count in that the Accord is new and Odyssey and TL (JDM Sabre) are coming about in a new model next year.

Of course, Honda will never be as big as Toyota, but at the same time, Honda will always pride itself as independent, something Nissan can't brag about.

asianautica

He's saying that Honda is inferior to Toyota. All his points are valid. Toyota are much bigger and it's seems like they're well on their way to achieving that #1 spot world wide. What's so special about being independent? Only a few years ago, Nissan was near extinction, now, their profit is almost as high as Honda, that's one of the thing Nissan can claim, over 50% increase in profit compare to last year.

kazi

I think that's more of that executive's pride saying that. Yes, Honda and Nissan will never touch Toyota in global sales. But does that make Nissan 'inferior' also? How about Subaru or Mitsubishi? Fact is, Honda's global sales are up, profits are high, new products are coming down the pipeline. They're just in a little rut at home right now, and home market only constitute about 10% of their business.

Profits goes to Renault. Management run by Renault. Renault basically runs the game for Nissan.


A little tibbit, the French government has controlling shares of Renault. h:

asianautica

All he's saying is that financially and a company as a whole, they're inferior to Toyota. He wasn't talking about the cars themselves.
Renault owns 41% of Nissan but Nissan also own 33%(if i'm not mistaken) of Renault. But it really help Nissan when it comes down to it. More $$ will allow them to bring more product to market faster. Who cares if Goshn runs Nissan's game, at the end of the day, it'll still be Nissan's platform and Nissan's engine and Nissan's R&D. Just Renault's $$.

kazi

Again, Honda and Nissan will never be as large as Toyota in sales and financially. That still does not constitute as being 'inferior' when global sales, revenue, and profits are up.


Renault holds voting shares of Nissan, Nissan holds non-voting shares of Renault. At the end of the day, Nissan is run by Renault, Renault reaps the profits and uses Nissan's R&D and part bins for its own product. Basically making it Renault's bish. Renault isn't just giving Nissan $$$, just be to be a nice guy. Renault is a business and like most business, will do all it can to make the most of an opporunity.

asianautica

The contract between the two if I remember correct will allow both to own up to 50% of each other. Nissan just doesn't have the $$ to buy Renault share just yet. However, they have enough $$ to start buying back share 1.7% to be exact. Renault will also use Renault to help them penetrate Europe luxury market. It's a win win for both side. Without Renault, there would be no Nissan and Infiniti right now.

kazi

Let's stop bickering about this. I answered your question to "What's so special about being independent?"

A. All profits and revenues stays within the company
B. Local management run
C. R&D is not shared with outsiders
D. Can say they're a Japanese company and can contribute to economy by paying more of japanese corporate tax instead of french corporate tax (Nissan's profits that goes to Renault are pre-taxed from Japan and are taxed in France)
E. Pride

And that shares of Renault that Nissan has (or will have), I already told you, they're non-voting shares, so it's not an even trade of one another. Renault has enough of the voting share to have management control (even if Nissan exercise to buy 1.7% of it back), something Nissan management will never say it has over Renault.

iNteGraz92

kazi already said that. nobody brought up the subject of cars.

asianautica

If you follow my conversation w/ kazi, I was just answering the question is asked:

"Yes, Honda and Nissan will never touch Toyota in global sales. But does that make Nissan 'inferior' also?"

I said in Nobuhiko Kawamoto's view, financially, they all are.