Honda dealers expect bigger inventories, new products
Age: 51 Dealer since: 1980 Dealerships: Honda East, Maserati of Cincinnati, Beechmont Audi, Porsche of the Village, Beechmont Toyota and Volvo of Cincinnati, all in Cincinnati Average monthly Honda sales in 2011: 125 new, 75 used Quote: "We have to spend to stay up with our competition. We need that share of voice back. I am worried that customers have a feeling that there is a shortage of Hondas, and I don't think that's the case. We need people to know we have cars and that people can get a great deal on a Honda."
Of all the Japanese automakers, Honda Motor Co. appears to have been the hardest hit by the March earthquake in Japan and the flooding later in the year in Thailand that severely damaged the supplier network.
Yet Honda dealers were able to get through 2011 by refocusing their efforts in certified pre-owned cars and in the service drive.
As incoming dealer advisory board chairman, Bill Woeste, dealer principal of Honda East in Cincinnati, will be the main factory liaison during Honda's projected 22 percent sales rebound this year as inventories return to normal levels. Also, with the Civic getting a relaunch and the arrival of the redesigned CR-V and Accord, it should be a big year for Honda.
Woeste spoke with Staff Reporter Mark Rechtin about what 2012 holds in store.
How was 2011 for Honda dealers?
It's hard to say, only because who could forecast for an earthquake, horrific tsunami and the last shot of flooding in Thailand? It's impossible to incorporate the effects of such things on a business plan. It probably was a decent profit year. Dealers learned how to better handle that uneven flow of new cars.
When I look at my dealership through March, we were headed for the best year in our history. Then the earthquake happened, and all of a sudden nobody really knew what the effects were going to be, and it took a couple months for things to pan out. It was a significant reduction in the number of cars we got. Used-car sales were up, and we looked at all aspects of our business. Thankfully it wasn't as bad as first thought because a lot of people in Japan really made some extraordinary efforts.
Honda has been optimistic about returning dealer inventories to normal. How does it look from a dealer perspective?
Looking at my Honda and Toyota franchises, Honda has been conservative with releasing that type of information to dealers. John Mendel [American Honda executive vice president] doesn't want to come out saying "Here's how many cars you are going to get" unless he knows it. Toyota's information was a lot more free flowing, but not as reflective of the inventory on my lots. In March, we had some extra cars on the Toyota lot for market rep reasons because we had built a new store. But when they said manufacturing was at 100 percent, we were running out of cars, and we were like that until the end of 2011. Honda was a lot more conservative, and the information has been better than what I expected as a dealer.
What are the biggest issues Honda dealers face this year?
Assuming normal inventories, the biggest thing is consumer confidence. It looks like it's continuing to improve. But it's also top of the list for possible bad things. [If] Europe goes into a recession that could dampen the U.S. economy. So it's not like anyone knows; it's not really predictable.
Are dealers satisfied with Honda?
My impression after the dealer meeting is yes. I would add that if there is something that is important, it's that Honda needs consistent, aggressive marketing. The ad dollars and incentive dollars are tied to cars. So when our cars disappeared, the ad and incentive dollars went away, too. For these aggressive sales goals, those things need to be in place and ready to go.
Is it good to advertise during the Super Bowl or a waste of money?
If it were me, it would be hard to spend that kind of money. In today's world, what's on TV isn't as important as what I can look up on my iPad, when people can just look up the commercial snippets. You would think they would put more creativity into it. The buildup makes the commercials anti-climactic. They've already been ranked.
Are Honda dealers profitable?
They don't share exact numbers, but in regional meetings, they say what percent of dealers [are losing money]. And that number declined last year.
Are dealers making money on new-car sales?
I would say yes. Honda is more the kind of brand where the transaction price is closer to the MSRP. It's less of a mass brand, where guys are advertising $9,000 off. I don't know how those brands can do that.
What is the general feeling among Honda dealers about factory incentive programs, especially stair-step volume incentives?
I can't quantify it, but it's about 40 percent being unhappy. It seems like a lot [of the unhappy dealers] are ones where Honda is their only brand. Honda isn't saying if the program is going away. There's a stair-step program going on now, but I've only got a couple [complaint] calls about it. I think dealers are getting back in business and are willing to try anything.
Does Honda's certified pre-owned program work for dealers?
It is spectacular. That really helped last year. There were a lot of dealers, particularly when you get close to Michigan, who weren't in certified business. And they jumped on board with certified, and they are reborn dealers who found a second franchise within the franchise.
What are Honda dealers doing to attract more service business? Is the factory helping?
Unlike some others, Honda does a really good job with direct mail. It may seem a little old school, but it works very well.
How difficult is it to get Honda customers financed, especially since American Honda Finance has been conservative in its customer lending practices?
I would disagree with the idea that they don't buy deeply. When you take a step back and look at the whole pool of people that we sold to and financed, Honda is buying exactly what they should be buying. In all the meetings I've been to, I've never heard a complaint.
What's missing in the product lineup?
I don't think anything. I was concerned last year when there was doubt about Ridgeline, because we need it. People need it to go to the landscaping place to buy plants. There is a space for a small, fuel-efficient pickup. I was glad to hear Ridgeline is not going away. Honda also did a pretty good midcycle job of improving the competitive positions of Ridgeline, Pilot, Insight and Fit.
The dealers were very excited about the new CR-V and to see the new Accord Coupe concept. But a lot of guys didn't notice that Honda brought out those other models where Honda made some changes that improved their competitiveness.
Do you worry that the poor reception to the Crosstour, CR-Z and Insight means that Honda has forgotten how to develop cool niche vehicles?
I don't think so. When that happens, it seems as though it was a misfire at launch. Looking at the [Toyota] Venza, there was a similar issue for that car at launch. It came out way too expensive, and Toyota got that under control. They said it was a $26,000 car, and the cars dealers got were $40,000. With Crosstour, I think customers weren't sure where it fit. When we started using them as service loaners, and people could get into the car, sales started going up. So maybe it was an awareness thing. People remember the starting price. I would prefer they come out with a less expensive one and step it up after then. I think they fix those things as they go.
Are dealers and customers disappointed in the new Civic's interior? Or is this just a media tempest in a teapot?
It was not an issue until it was in Consumer Reports. And not everyone reads Consumer Reports. Sales are rising with inventories. The reviews are mixed. But customers are accepting the product.
Is Honda advertising attracting your target buyer?
With a higher sales pace, we're going to need more advertising. And our competition is spending a lot more money. So we have to spend to stay up with our competition. We need that share of voice back. I am worried that customers have a feeling that there is a shortage of Hondas, and I don't think that's the case. We need people to know we have cars and that people can get a great deal on a Honda.
What do you think of Honda advertising?
I don't know if anything works the way it used to. Everything changes so fast. Honda has a new chief marketing officer in Mike Accavitti, and every time a new guy is going to put his fingerprint on what is done. That means things are going to change. The Acura spots are already changing.
What is Honda telling you about the marketing launch of the CR-V?
They had a cameo spot with the new CR-V as a supporting role on "The Bachelor," where they kind of laid out a "leap list" with the bachelor and bachelorettes sitting in the car. So they are hitting that 30-something female audience. They did a great job on a national TV audience. It was pretty neat implementation of product placement.
How are Honda's loyalty programs working?
That's something we're going to work on in the upcoming dealer subcommittee meeting, to coordinate parts, service, finance, sales and marketing, to come up with a corporate strategy for loyalty. There isn't a corporate strategy right now.
Is Honda doing enough on the social media and Web-based marketing front?
I would say they have a good handle on social media.
How are dealers responding to Honda's facilities-improvement requests?
In our region of 110 dealers, there are less than 20 that have not completed it. They're actually slowing down a few of the changes because there has been a minor change to the blue Honda cylinder on the front of the building, but it seems to be going well.
What are your feelings about TrueCar?
What I find and what I hear sometimes surprises me. Some Honda dealers say we need to do something about TrueCar, but then they'll turn around and sign up for it. Sometimes dealers don't even know that they were signed up for something like that.
I would be concerned with privacy issues, with unfettered access to my customer database. We don't do it. We restrict access to our customer information. TrueCar's mission is to bankrupt the franchise system. Why would anyone want to participate in that? But everyone is worried that the next guy is going to take advantage. But we can sell a car to someone with a coupon just as easily as anyone else.