Honda's adjustable Accord should provide boost in sales, profitability

The Outlook

September 07, 1997|By Eleanor Yang

AFTER YEARS of going head to head with Toyota's Camry and Ford's Taurus in all the world's major markets, Honda Accord designers have manufactured a global 1998 model that they hope will cut costs as well as address the differing American, European and Japanese tastes.

What they've done is engineered a platform, the expensive foundation of cars, that can be used for each model, with the use of adjustable brackets. That way the world's 13th-largest carmaker cancost-effectively manufacture a roomy American Accord, sporty Japanese model and narrow European version.

Considering that more than half of Honda's North American profits come from the Accord, how much is riding on the 1998 model? Will the model, which hits showrooms Sept. 25, be successful?

Maryann Keller

Managing director and auto analyst, Furman Selz Inc., New York

This one will be the No. 1 car next year.

I think the platform will be successful because the approach is to design cars unique for each market. The only thing they will have in common is the under-the-skin structural components, many of which have been designed to be flexible.

The problem with global cars is everybody was trying to create a car that fit the needs around the world, and they found themselves making ones that nobody liked, because it didn't match any country particularly. Now Honda has been able to make the Accord narrower or wider or longer or shorter, with the brackets. No other carmaker has been able to do that up to now.

Of course others are going to try to replicate it now. So how much long-term effect it's going to have on the company is hard to say. But it certainly confirms its short-term strategic advantage.

Michael Flynn

Associate director, University of Michigan's Office for the Study of Automotive Transportation

Accord right now is about third in the mid-sized sedan category, behind the Camry and Taurus. Probably would-be Accord buyers are waiting to buy the new one.

The thing about Honda is it's smaller and more focused. It makes a limited range of cars, so any one car for Honda is proportionally more important than any one car for GM. But it is in good shape. If this model isn't successful, it won't go under.

There are platforms used by different makers for different vehicles, but I don't remember any makers use one this widely. And that's very important, because the auto industry has made its way on economies of scale. The more they build, the more money they make. So in doing this, Honda is returning to good economies of scale.

In the next five- to 10-year horizon, the platform allows it to restrain cost as well as price. So it can choose to take in the profits or lower the price. If it does lower the price, even if you don't want to buy an Accord, it puts pressure on Toyota and GM to lower their prices. So in the long run, it's good for the consumer.

Christopher W. Cedergren

Auto consultant at Nextrend in Thousand Oaks, Calif.

Honda did all of this to cut costs dramatically, and to increase sales in Japan and Europe. Three separate Accords will go to the three different markets, and that should produce profitability.

If this car does not make it, I don't think there's much risk here overall, even for the long term. Honda has done a wonderful job engineering the car, in terms of performance and profitability. I've actually driven it, and I can say Honda has continued to push the benchmark in that area.

Edward Lapham

Executive editor, Automotive News, Detroit

I think Honda is definitely going to give Camry a run for best-selling car next year.

Do they have a lot riding on it? Yeah, it's a fairly substantial investment. And this is their value car. This is the car that's moving upstream for them. The Acura division, while it was the first so-called Japanese luxury brand -- it really hasn't kept up with Lexus and Infiniti. I think the heart of the market is really where Honda has the best chance.

And I think the platform strategy they've adopted will be successful. It's actually just a modified version of what they've been doing for at least the last three years of the generation. The tTC fact that they'll be doing it on one platform will save them engineering and development time. The question really comes down to, at the end of the day in Detroit, the dog has to eat the dog food, and if the dog doesn't like the dog food, everything Honda has done will have not been worthwhile. But I think that they will in fact succeed. I think Honda has such a terrific track record, I have no doubt about their success.

As to how much, Honda is a much larger player in Europe and North American than in Japan. So this will keep them strong in their existing markets and increase their shares a little bit in other parts of the world.

Pub Date: 9/07/97

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