New-Product Pipeline Is Holding Back Honda

Slow to Change: Sales Are Strong, but Design Lags; Experts Say Japanese Star Is at a 'Critical Point'

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The bloom may be off the Honda rose.

That's the consensus among experts, who cite marketing and product design as especially troublesome areas for American Honda Motor Co., marketer of Honda and Acura vehicles.

Assessing the Automakers

When was the last time the auto business was this cutthroat? It's tough out there on the car lots, many of which are choked with acres of sheet metal. This Special Report is devoted to a group of experts' unvarnished appraisals of how six top carmakers are doing, along with a look at two up-and-comers.

Honda Score

The competition:

Keeping up and moving on
Advertising Age's panel of auto experts gave American Honda an overall grade of B for 2006. These industry observers believe the Honda brand may be too slow to change, a victim of its own past successes, while the upscale Acura brand faces deeper challenges as a result of not having successfully charted its course.

American Honda's unit sales climbed 3.2% last year to 1.5 million, with Honda and Acura both reporting record sales. That looks even better next to Japanese rival Nissan North America, whose sales fell 5.3%. But American Honda seems sluggish beside the 12.5% increase of Toyota Motor Sales USA.

Though March, 2007 is off to a strong start. American Honda posted its third-best month ever, with record March sales of 143,392 vehicles, up 7.3% from a year ago. Sales are up 3.3% to 354,208 units so far this year.

"Sales are on track for another record year in 2007 with over 1.4 million units," says Tom Peyton, senior manager-national advertising at Honda Division. Susie Rossick, Acura national brand manager, adds that for 2007, her line is looking at numbers similar to 2006.

Honda's 'conundrum'
The Ad Age panel of experts is less upbeat. "They're at a really critical point with sales. Demand and supply are out of equilibrium," says Jeremy Anwyl, president of "It's going to be interesting to see how they deal with this conundrum in the next six to nine months."
Tom Peyton, senior manager-national advertising at Honda Division
Tom Peyton, senior manager-national advertising at Honda Division

Honda got a B+ for its performance in new products, with debuts ranging from the Ridgeline pickup truck (introduced in 2005 as a 2006 model) to the subcompact Fit.

But design remains an issue. "They've got to take a much stronger stance when it comes to design," Wes Brown, partner at Iceology, says, adding: "I don't see any new products coming down the pipeline that will help Honda or Acura do better."

"The Ridgeline was an incredibly pathetic launch, and it took a long time and dealer trunk money to get the sales numbers to where they were expected to be," says Todd Turner, president of Car Concepts. "I think you'll see that Ridgeline sales have peaked."

Spending with RPA rises
RPA, Santa Monica, Calif., handles the Honda and Acura lines. Measured media spending rose 2.7% in 2006 to $878 million, according to TNS Media Intelligence.

"Neither Honda's nor Acura's advertising is memorable," says Charlie Hughes, president of Brand Rules, co-author of "Branding Irons" and former Land Rover North America CEO. "The Acura effort is easier to criticize since they don't yet know who Acura is. Acura is somewhere between Honda and a real luxury car."

He adds: "Acura is a walking textbook of every ad cliché ever created."

Ad Age's panel says American Honda has long enjoyed a reputation of invulnerability. "Honda thinks they can put their badge on a vehicle and it will sell," Mr. Turner says. "That's not the case anymore."

Next: Kia and Suzuki

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Jeremy Anwel


Charlie Hughes



Todd Turner

Car mavens sharpen their pencils
The automakers' grades are based on individual assessments offered by automotive analysts Jeremy Anwyl, president of; Wes Brown, partner at consultant Iceology; Charlie Hughes, president of Brand Rules; Doug Scott, senior VP at GfK Automotive; Art Spinella, president of CNW Marketing Research; and Todd Turner, president of Car Concepts.

The grades refer to the automotive marketers' 2006 performance. The advertising/communications category includes the effectiveness of traditional, measured-media advertising as well as nontraditional marketing, with particular emphasis on the use of new media. Actual-sales grades are based on percentage change in 2006 vs. 2005, but they also take into account the particular challenges each carmaker faces.
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