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Why does Honda have a more loyal following? Maybe because they've earned it!

Why are Envoys sitting on the lot while Pilots are going on backorder? Gee . . . . . I wonder . . . .

From Auto.com

Honda has the customers for its future factories

July 18, 2002
BY DORON LEVIN

Southfield, Mich. -- To understand why Honda Motor Co. is investing $466 million to double its plant capacity in Lincoln, Alabama, you only need to visit Paul Richards's Honda dealership in Brighton, Michigan.

The new Honda Pilot sport-utility vehicle has been a smash since going on sale in June. Whether you bring a dealer cash, check or credit card, you likely can't buy one -- even getting a test drive is chancy.

You can add your name to the list and put down a $250 deposit," Richards said. I have about 15 to 18 customers waiting." Buyers must wait a month or two, sometimes more, to get the color and equipment they want. The automaker allocates his dealership about 10 Pilots a month, and owners claim them as fast as they arrive.

Brighton Honda, about 30 miles from Detroit, so far isn't adding a premium to the Pilot's suggested retail price, which starts at $27,360 for the base model. It could. Elsewhere, dealers are tacking on $1,000 and more to the retail price.

A mile and a half down the road, at Richards's Superior Cadillac-GMC dealership, about 35 GMC Envoy sport-utilities stand shining in neat rows. The Envoy is selling well, too, Richards said, partly because most buyers qualify for several thousand dollars" in discounts from the list price of $32,425 for the base four-wheel drive model from General Motors Corp.

In other words, the prices of the two sport utilities are similar, as are size and performance. The Hondas vanish as fast as they appear, while GMC Envoys are plentiful and require some discounting to sell.

Devotion to Honda

The enthusiasm of Honda buyers can be explained by a near- fanatic devotion to the brand, Richards said. Customers often will forgo color and equipment preference in order to get their hands on a vehicle before someone else buys it.

Loyalty to the Honda brand stems from their vehicles' relatively trouble-free performance, backed by high ratings in numerous quality surveys. Once I sell them I don't see them in service except for oil changes," he said. There isn't much variation in color and equipment packages, he said.

GMC buyers don't buy unless they can get the color and equipment, such as heated seats, that they specify. Richards often can accommodate them because other GMC dealers also carry big inventories, which are costly, and will trade with him.

What's clear to Richards is that the General Motors vehicles have many more problems than Hondas. Little wiggly things, like the molding on the Envoy's windshield that wasn't right," he said. On some GM models we're trying to fix things we don't know how to fix, like a remote-control mirror that won't work."

Recalls

Since the GMC Envoy went into production in early 2001 General Motors has recalled it six times: to replace a defective suspension arm; to replace a cracked transmission part; to correct a fuel filter that could disconnect; to replace a latch on a console, and two other transmission problems.

Pent-up demand for Honda Pilots is particularly remarkable in suburban Detroit, a market where many residents prefer General Motors, DaimlerChrysler AG and Ford Motor Co. models because they receive employee discounts or for reasons of company loyalty.

Richards's inventory also is tight for Honda's Odyssey minivan, introduced in 1999. If you're flexible on color, I might be able to get you one in two weeks," he said. Otherwise, put down a $250 deposit and it will be 45 days."

Long waits and lack of equipment and color choice don't deter Honda customers, suggesting demand for its models far outpaces supply. Honda's share of the U.S. market was 7 percent in this year's first six months, up from 6.9 percent last year.

Increasing Capacity

It's hard to imagine that Honda's share won't jump higher by a few points, at least, as it channels profit from current operations into investment in additional factory capacity to build more vehicles. Honda's manufacturing philosophy of building fewer vehicles than the market demands is proving effective.

On Wednesday the automaker's president, Hiroyuki Yoshino, forecast that Honda will finish fiscal 2005 with 20.4 million customers for its cars, motorcycles, lawnmowers and other products, up 60 percent from the 12.7 million in the 2002 fiscal year, completed on March 30.

For General Motors and other Detroit automakers, the question is: Will they have to give up market share when Honda's new assembly capacity comes on line in Alabama and in other locations? Some analysts say the overall market will grow, meaning sufficient customers for the automakers and all their assembly lines.

More likely is that General Motors, Ford or DaimlerChrysler's Chrysler group will be forced to closed factories unless they find a way to close the quality and reliability gap.
:4:
 

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Interesting article, however ...

Quote from Article: "It's hard to imagine that Honda's share won't jump higher by a few points, at least, as it channels profit from current operations into investment in additional factory capacity to build more vehicles. Honda's manufacturing philosophy of building fewer vehicles than the market demands is proving effective."

... Japanese automakers are guilty of artificially creating an inventory discrepanacy vs. US automakers by just such an attitude mentioned here.
In other words Honda (also Acura) admits to puposely underproducing their vehicle to keep the prices up. They prefer to exxagerate the demand for their vehicles by purposely producing less than "required" slower than "required":confused:

Thanks Honda:28:
 

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i'm curious on how this supply vs demand works in this manufacturer-dealer-consumer scenario. what does honda/acura get out of purposely slow production of these hot in demand cars? do they get to charge the dealers more than the stated invoice price? if not, it seems the only people getting rich are the dealers who are making $$$ at msrp or msrp+.
 

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Aside from production efficiencies that come from maximizing existing facilities, they do not need to eat into profits with below market consumer financing, rebates, warranty costs, dealer incentives, inventory carrying costs, advertising, etc etc
 

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Managing "demand" & "supply"

Maik said:
Aside from production efficiencies that come from maximizing existing facilities, they do not need to eat into profits with below market consumer financing, rebates, warranty costs, dealer incentives, inventory carrying costs, advertising, etc etc
The two most ENVIED carmakers in the world (by other manufacturers) are HONDA & BMW.

Whenever BMW decides to "release" an M3 or M5 they sell out. They easily COULD make more units and more total dollars, but instead they choose to surround the cars with an aura of "unobtainability". They manage the 'demand' by artificially limiting the availabilty and the result is "consumers lust for 'em".

Fortunately Honda is bit more mainstream, and instead chooses instead to just keep a tight reign on production. They are just biased toward 'unproduction' for the virutes listed by Maik.

I suspect the production planning used by Honda is completely incompatible with the type of union contracts that GM has negotiated. I think GM has to run plants at about 90% of capacity just to keep from eating the payroll costs...

A better question would be what kind of production controls does Infinity employ? I was at dealer over the weekend who had like TWO DOZEN QX-4 all still wrapped in plastic an looking like they were sitting there since SPRING. YIKES, wonder what that is gonna do to Nissan's profits???
 

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Re: Managing "demand" & "supply"

renov8r said:


I was at dealer over the weekend who had like TWO DOZEN QX-4 all still wrapped in plastic an looking like they were sitting there since SPRING . . .
They could sell them to hertz as rental units for the rare occassions that our 'Xs need to go into the shop for more than 1 day !!! :D :4: :p
 

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When I receive the call from American Honda regarding my purchase of MDX, I told them Honda shouldn't allow their dealer to sell over MSRP. I understand supply and demand. But it's not right if you want to stay in the business for the next 200 years.

Just my $0.02
 

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Re: Managing "demand" & "supply"

renov8r said:


A better question would be what kind of production controls does Infinity employ? I was at dealer over the weekend who had like TWO DOZEN QX-4 all still wrapped in plastic an looking like they were sitting there since SPRING. YIKES, wonder what that is gonna do to Nissan's profits???
But it looks like they are starting to do the right things with the new Altima, and the G35, recently crowned the best luxury sedan among 11 (including BMW 3 series, Jaguar, Volvo S80, Lexus IS300, etc...) Plust the Nissan Murano (Highlander combater) is coming out with a 9 inch Navi screen and DVD playability, they look like they are turning things around!!
 

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Everyone is always b itchin at Honda for not makig enough cars in order to meet customer demand but people don't realize that in the last last 10+years Honda has exprienced such an explosion of growth, it truly is hard to believe. Lets take a look at the year 1990 in which Honda had the Cvic, Accord, Prelude Integra and Legend as their models in North America. Now all these cars came from either 1 of the 4 major Honda plants in the world. There was the U.S plant in Ohio, the Canadian plant in Ontario the 2 plants in Japan (Sayama and Suzuka)

In all Honda sold a modest amount of cars in North America compared to other brands.

Now flash forward to 2002 and Honda has the Civic, Accord, CR-V, Odyssey, Pilot, S2000,MDX, RSX, RL, Tl, CL, NSX, EL. Now compare the sales figures.

Accord- The best selling passenger car in America
Civic- Best selling small car in America and the best selling automobile in Canada
CR-V- Best selling small SUV in North America
Odyssey- Roughly 200 000 unites and super strong demand for it
Pilot- 100 000+ units for the Pilot, demand is overwellming
MDX- Est. at 50-70 000 units a year and strong strong demand
RSX- Around 50 000 per year with good demand of the product
RL - Around 15 000 a year, demand is on par with supply
TL/CL- Close to 80 000 a year with demand being very strong for several years now
NSX- Almot nothing at less than 1000 a year
EL- A Canadian model with very good demand
S2000- Maybe 15 000 a year with high high demand

Now if you look at the plants making these cars. Exept the NSX and S2000 which comes from a special Japanese plant all the above cars are made in 6 plants, factor in the NSX/ S2000 and its 7. All these extra cars are comming from only 3 more plants, and lets not forget to mention the fact that Honda has exploded in popularity in other parts of the world too like Europe and Australlia. So even with plant expansion's Honda can only push their production limits to a certain point with out losing their reputation as building reliable cars.

Thanks
Evan
 

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Unproduction is healthy to the company. Look at GM right now. Years of overproduction, means more workers. Now that sale is constricting, plus thanks to the economy, their projected investment return for retirement money alone is less than 10% as projected so they are negative like 21 billion dollars as conservative estimate by year end. Analyst think it will grow to 50Bln$ in two years. (all this at top of my head so real figures might not be accurate)

AT&T Wireless is right now investing heavily upgrading equipments to GSM because they are projjecting that consumers will start calling to sign in if they realized AT&T has cool features. What if not? They are 12billion $$ in debt now.

In fact, Corporate America are all almost in the same situation.

So Honda in general is just holding off greed in exchange for corporate stability.
 

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Evan

You make some good points here.

Are you a Honda/Acura Sales person?
 

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Evan

Whether Evan is an Acura or Honda sales person....Fact is fact...Honda knows what the HELL they are doing in EVERY aspect...
Racing, Developement, Manufacturing, Marketing and keeping customers....What is so amazing is...Dealer customer services for their vehicles are not that great compare to other automakers...yet we come back for more and more...why??? They build reliable quality cars...
 

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I just wish Honda will build compact and full-size trucks.

Also 4 door trucks.
 

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Evan said:
Accord- The best selling passenger car in America
Civic- Best selling small car in America and the best selling automobile in Canada
CR-V- Best selling small SUV in North America
Odyssey- Roughly 200 000 unites and super strong demand for it
Pilot- 100 000+ units for the Pilot, demand is overwellming
MDX- Est. at 50-70 000 units a year and strong strong demand
RSX- Around 50 000 per year with good demand of the product
RL - Around 15 000 a year, demand is on par with supply
TL/CL- Close to 80 000 a year with demand being very strong for several years now
NSX- Almot nothing at less than 1000 a year
EL- A Canadian model with very good demand
S2000- Maybe 15 000 a year with high high demand

Thanks
Evan
U are absolutely correct Evan! but u are a little off on the #'s

1. MDX- only 40,000 a year.
2. S2000- only 10,000 per year. 5000 of those allocated to U.S.A.

but Honda still needs to expand without losing focus of their heritage! The NSX( a car that i dream about every day) has not had an update in 11 years!:eek:
 

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NSX Update

The reason why the NSX has been updated in the last 11 years is because the way it is built. Supposedly the casting for the aluminum body and the way the aluminum is dipped in paint rather than robotically painted is because the type of metal they use is expensive...I don't know the actual process but I heard that changing the painting system and the casting at the NSX plant is EXPENSIVE. Far out way the profability of the NSX itself.

Another words...Updating the NSX is like...STARTING ALL OVER again for the NSX and the plant where the NSX is built.

Expect the S2000 to be the SAME way from Honda...you aint gonna see changes on the S2000 anytime soon...like another 11 years??:eek:
 

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I don't work for Honda or anything, I am just a huge Honda fan who loves to drive their cars.

As for the production numbers for the MDX and S2000 they are pretty close acually. You can tell by looking at the vin #'s, the last few digits indicate what number that car is in terms of production.

Here is a list of some sales numbers for the US market.

9 750 units sold in 2000, 40 950 units sold in 2001.

Also factor in the extra few thousand units made for the Canadian market and you have a number higher than 40 000 units a year annually.

Here is the link http://www.hondanews.com./forms/corp/sales/3.8AcuraVehSales.html

As for the Honda S2000 the numbers are as follows

1999 3400 units
2000- 6797 units
2001- 9682 units

So as for Honda saying only 5000 units were going to be made for the US a year, not true. They saw the demand and responded with more production.

Also you have to give about an extra couple hundred units a year extra for Canada's market.

Here is the link

http://www.hondanews.com./forms/corp/sales/3.8AcuraVehSales.html



Evan
 

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There are always rumors about Honda ending the S2000 production each year. Fortunately, that hasn't been true yet :)

As for the MDX, I'm sure that Honda will try to meet some of the demand because there is no reason to hold back now. Initially, it makes the car more "elite" but there is no substitution for raw #s. The S2000 will likely stay <10,000 per year and may fall back towards 5,000 once the demand is met.
 
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