Honda dealers scramble amid stampede to small cars

"Civics are going like crazy," says Ernie Boch, owner of the top-selling Honda store in the country. As gas prices rose, Boch spent $2 million buying up cars from other dealers around the country. Photo credit: ARTHUR POLLOCK
For two days last week, Honda dealer Rene Isip stalked the lanes at the Manheim auto auction in Orlando, Fla., in search of used Civic and Fit cars for his store in Katy, Texas.

Isip's dealership, one of the top 100 Honda stores in the nation, was almost depleted of new ones.

"We're out of Fits," he said, "and our days supply of Civics is in the single digits."

Getting used models was brutal, too.

"I'm standing here looking right now," he told Automotive News via cell phone. "A 1-year-old used Civic is running about $1,000 over sticker of a brand new 2008. And the dealers are paying it."

Honda's small cars — which both get about 34 mpg on the highway — are hotter than a $2 pistol on the Fourth of July. As $4-a-gallon gasoline pushed consumers to fuel economy, the Civic was America's best-selling vehicle last month at 53,299 units. The Civic's previous best-ever month was 39,993 units in May 2007. And Honda sold 8,205 Fits, up 53 percent over May 2007.

Dealers fear they may run out of Civics and Fits altogether if the automaker can't bump up production. Honda uses a turn-and-earn allocation system, but because of strained supplies, retailers say they are turning more than they can earn.

Dealers say they have ample supplies of Accords and light trucks but can't keep up with sales of the smaller vehicles.

"Civics are going like crazy, and there are no hybrids," said Ernie Boch, owner of Boch Honda in Norwood, Mass., the top-selling Honda store in the country.

In the past month and a half, Boch said, he has spent $2 million buying cars from other dealers around the country.

"I wanted to hedge my bets, so I bought from other dealers," he said. "We could see it coming. All indications are that Honda could run out of cars."

Toyota dealers are scrambling, too. The Corolla/Matrix zoomed to the No. 2 sales spot in May at 52,286 units — less than 500 shy of the Civic. At David Maus Toyota in Sanford, Fla., north of Orlando, the dealership's managers found out that Toyota had 30 new Corollas sitting at the port in Jacksonville that had not been sold to a dealer.

"We bought them all," said Melvin McCune, new-car sales manager.

Gone in a day

At the nation's No. 2 Honda dealership, Norm Reeves Honda Superstore in Cerritos, Calif., owner Dave Conant started May with 150 Civics and sold 230 during the month.

He started this month with 160 Civics. By Tuesday, June 10, he had sold 87. He expects to sell about 280 for the month.

"By the second week of July, we will have no Civics on hand," he said. And the Fit? "They come and go the same day."

The Civic and Fit, along with the redesigned Accord, propelled Honda Division to record car sales last month — 105,548 units compared with a previous best-ever month of 84,390 in August 2003. Combined car and truck sales in May rose 18.3 percent to 153,104. Honda Division's truck sales were off 8.8 percent, with every truck nameplate down except the four-cylinder CR-V crossover.

"We knew we were positioned right in the marketplace," Dick Colliver, Honda's sales chief, said at the Automotive News marketing conference last month. "Because of the price of fuel, we have a competitive advantage. But we are suffering with our trucks and minivans. We need to adjust production to meet demands."

Robby Cochran, general sales manager at Yuba City Honda in California, said his store ran out of the Civic LX sedan in May. Cochran now has 13 Civics in stock, compared with 64 Accords, which is normally his best-seller.

"You usually don't run out on something as common as the Civic," Cochran said.

Supply of the Civic has plunged from 72 days on March 1 to 20 days on June 1. Supplies of the Fit dropped to 20 days from 40.

It's not only big dealers scrambling for inventory. Barbara Saccucci, owner of a small Honda store in Middletown, R.I., said she sold 25 Civics in May, up from her usual eight to 10. She has eight Civics in stock, down from the 25 or so she normally carries.

"We are very concerned that we will not have as many Civics as we need to fill demand," Saccucci said. "Honda is good about distribution, but it's more a production issue than anything."

Raising output

Erich Merkle, forecasting vice president for IRN Inc., a consulting firm in Grand Rapids, Mich., expects Honda to boost overall third-quarter output in North America 15.2 percent from last year to 383,000 vehicles. He said Honda also has escalated production in the second quarter. Merkle expects an increase of 11.2 percent in the second quarter to 412,000 vehicles.

Honda said its flexible plants will help keep pace with demand. The automaker produces Civics in East Liberty, Ohio, and Alliston, Ontario. In October, the company will begin building them in its new plant in Greensburg, Ind.

Alliston will ratchet up even more Civic production next year because Honda is moving the Ridgeline pickup to its Lincoln, Ala., plant in early 2009.

Meanwhile, Honda has been periodically working overtime on Saturdays and occasionally during the week, said Honda spokesman Ed Miller.

"We can stretch that out even more if necessary," Miller said.

American dealers must stand in line for the Japan-sourced Fit, which is popular around the world. Colliver said U.S. dealers got an extra 30,000 to 40,000 units of the 2008 model. He says they're scheduled to get even more when the Fit is redesigned for the United States for the 2009 model year.

Meanwhile, Cochran of Yuba City Honda says he's not panicking. "We just roll with the punches," he said.

Indeed, most Honda dealers don't sound overly alarmed.

"The bad news is that demand will continue to be stronger than supply," Conant said. "But the good news is that we can restore our gross margins. We can sell for sticker again."  

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