WSJ: Honda Will Offer More Fuel-Efficient Models for Drivers
July 21, 2005
ASIAN BUSINESS NEWS
By JATHON SAPSFORD
Staff Reporter of THE WALL STREET JOURNAL
July 21, 2005; Page D1
Honda Motor Co. is betting the U.S. car buyer is an environmentalist at heart.
Japan's third-largest car maker -- and the fifth-largest producer in the U.S. -- unveiled a slew of ambitious fuel-efficiency targets and said the environmentally friendly technologies are key to its goal of boosting annual sales by more than 20% over the next three years to four million cars, trucks and vans world-wide.
It's part of a broad effort among auto makers to grab consumers' attention as fuel prices hover near record levels. In one of the most significant indicators of shifting consumer tastes, sales of hybrid vehicles -- which use a combination of gasoline engines and electric motors -- have soared in popularity in recent years. Buyers have to wait months to buy a Toyota Prius hybrid, which gets roughly 60 miles to the gallon in city driving, according to government figures. A number of auto makers, including General Motors, Ford and Nissan, are considering adding smaller, more fuel-efficient cars to their U.S. lineups.
The redesigned Civic concept car
Yesterday, Honda said it planned to sell a version of the Honda Fit -- a tiny car that's a hot seller in Japan -- in the U.S. starting early next year. It also plans to roll out an aggressive redesign of its Civic, which already comes in a hybrid version, in an effort to give the car a sleeker, edgy look. The company also laid out an ambitious plan to sharply improve the fuel efficiency of its conventional engines.
Hybrid technology isn't a slam dunk for consumers. In most cases, the hybrid propulsion system, which can boost the sticker price by thousands of dollars, doesn't save enough in gas consumption over the life of the car to make them economical. Both Toyota and Honda have been trying to get around this barrier by selling hybrids as a performance technology, noting that the electric motor can add to the punch of the conventional combustion engine.
But senior Honda officials understand that not every customer is going to go for that. So Honda is also putting a lot of resources into boosting the efficiency of its conventional gasoline engines, which they say have recorded improved fuel efficiency by 30% over the past decade. Honda says it can still get a lot of environmental bang for each buck invested by making these standard engines more efficient.
The company set a goal of improving fuel efficiency by 11% to 13% over the next three years for the engines it puts in such models as the Accord sedan, the Odyssey minivan or the new Ridgeline light pickup. In its motorcycle division (Honda is the world's biggest motorcycle maker) the company says it plans to improve fuel efficiency by as much as 30%.
"One of the most effective environmental protection efforts we can pursue at the moment is to improve the efficiency of internal combustion engines," said Honda President Takeo Fukui, at a news conference in Tokyo.
Honda was the first auto maker to offer a hybrid vehicle, the futuristic Insight, which went on sale in the U.S. in 1999. But more recently, the sales momentum in hybrids has gone to Toyota, which is rolling out a second generation of hybrid vehicles, everything from its own geeky Prius econobox to high-end Lexus sport-utility vehicles such as the RX 400h. May sales of the Prius, at 9,461 cars, did better than such mainstream high-volume rivals as GM's Pontiac G6 and the Chrysler Pacifica.
The challenge for Honda is to regain a reputation for innovation, and to reinvigorate relatively slow sales growth in some areas. Honda makes little secret of its belief that a big chunk of hoped-for growth in coming years will be in the U.S., where rivals such as General Motors Corp. and Ford Motor Co. are stumbling as sales of profitable but gas-guzzling SUVs have cooled. Honda's ambitions, outlined by officials in Tokyo as part of a three-year plan, also underscore its effort to get back some of the buzz that's gone to its bigger Japanese rivals in recent weeks -- notably Toyota Motor Corp. which has grabbed attention with environmental technologies.
Fuel efficiency, of course, has long been the trump card of Japan's manufacturers in the global auto race. The renewed push in this area isn't good news for the car makers of Detroit, which are preoccupied with a slew of issues.
GM and Ford are facing thorny problems from weakening finances to rising medical costs for unionized employees and retirees. GM yesterday reported weaker-than-expected second-quarter results1, as its core North American auto operations had a loss of $1.2 billion. Earlier this week, Ford reported a 19% drop in second-quarter profits, stemming in part from a $907 million pretax loss in its North American auto operations. The company said it was considering further reductions in manufacturing capacity.
Honda, by contrast, noted that it began a new automatic-transmission plant in Georgia in May, and is boosting U.S. production of crucial components in Ohio and Alabama. Honda said it would invest roughly $300 million to produce power trains in North America to meet demand.
Honda's plans to boost overall vehicle production and sales to an annual four million vehicles by March, 2008, comes after it sold 3.24 million cars in its most recent year ended in March 2005. That compares with the roughly 8.9 million units in annual sales by General Motors and the 7.4 million for Toyota.
Honda also announced plans to expand annual global motorcycle sales to 16 million bikes by the end of March 2008, up from 10.5 million last fiscal year. Separately, it said it will take another step toward realizing its 20-year quest to become a jet-aircraft maker next week when a small jet it has been developing makes its first public demonstration flight at an air show in Wisconsin.
---- Norihiko Shirouzu in Detroit contributed to this article.
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