Japanese plants bounce back
Toyota and Honda poised for sales surge vs. Detroit 3
 | Mendel: "It feels good to have inventory." |
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Since a devastating earthquake struck Japan last March, Toyota and Honda dealers have been screaming for more cars and trucks.
Now they are finally getting their wish. Toyota Motor Corp. and Honda Motor Co. will lead a second-quarter production surge in North America.
The increase will let Japan's two top automakers gain ground on the Detroit 3, whose production in the second quarter will be largely flat.
Toyota and Honda are expected to more than double North American output from depressed 2011 levels, according to IHS Automotive. The surge will return second-quarter production to slightly above 2010 levels for the two companies.
Meanwhile, Chrysler Group expects to boost output 7 percent in the quarter, and General Motors and Ford Motor Co. plan modest decreases that reflect changeovers to some new models.
Bob Carter, Toyota Division general manager, said Toyota will launch a barrage of marketing support when most of the inventory arrives. Big campaigns for the Camry, Tundra, Prius and Corolla will follow Toyota's traditional spring sales event in March.
"What you shouldn't expect is a great departure in either our incentive strategy or fleet strategy," Carter said. "There won't be trucks with $7,000 in the bed. Our product has too much value for us to market it that way."
John Mendel, American Honda executive vice president, said Honda expects inventories to grow about 10 percent each month starting in February. Honda said it gained 40,000 units of inventory in January, but is still off 30 percent from this time last year.
"It feels good to have inventory on the ground for a change. It's a nice return to normalcy, where dealers can't see as much blacktop as they were," Mendel said. "There's still a lot of pent-up demand."
Honda will not change its limited incentives or fleet strategies, even though it's a time for big fleet sales.
| Full speed ahead | ||
| N. American 2nd atr. 2012 forecast | Change from year ago | |
| Toyota | 410,266 | 102% |
| Honda | 380,240 | 116% |
| Source: IHS Automotive | ||
Higher forecast
U.S. production at Toyota and Honda largely returned to normal in January, but inventories have remained tight. Toyota-Lexus-Scion, for instance, had a 42-day supply of vehicles on Feb. 1, and Honda-Acura had a 54-day supply. A year ago both companies had supplies of more than 60 days, according to the Automotive News Data Center.
According to a revised forecast by IHS Automotive, North American plants will boost production 17 percent to 3.65 million units from April through June, up from 3.12 million units a year earlier.
"We are seeing some meaningful strength in the industry," says Mike Jackson, IHS Automotive's chief production forecaster, "and we are seeing some upside potential."
Toyota and Honda are looking to bounce back from sales shortfalls last year. In 2011, Toyota Motor Sales and American Honda sales each fell 7 percent. This year Toyota is projecting a 16 percent sales gain, and Honda is forecasting a 25 percent gain, in an overall industry expected to rise about 8 percent.
For the full year, IHS Automotive expects North American vehicle production will total 14.4 million units, up 10 percent from 2011.
That's significantly stronger than its previous 2012 production forecast of 13.9 million units. And much of that increase will come in the second quarter.
Toyota and Honda dealers are ready for the inventory.
Dave Conant, CEO of Conant Auto Retail Group, predicts "it will be late second quarter before we begin feeling the production increases in our on-hand inventories." The Southern California group sells Toyotas and Hondas.
Part of the reason that the return to full inventories has been slow, Conant said, is because "people still want Hondas and Toyotas in bigger numbers than we can supply."
Multiline dealer Peter Hennessy in Atlanta, whose franchises include Honda and Lexus, says Honda has been "conservative" and "reactive" with market support so far this year.
Honda is in the midst of a Civic and Accord stair-step volume incentives program, but the sales objectives were set higher than usual. Honda also has installed "flex cash" that salespeople can apply to individual deals up to $700, but the funds available average only $100 per car based on the monthly objective.
"I would anticipate that Honda will let inventories build prior to getting any more aggressive," Hennessy said.
Joe Herman, COO of multifranchise group Kuni Automotive in suburban Portland, Ore., said Honda hasn't given specific production numbers "other than a heads-up that 'It's coming.'"
Herman hopes Honda increases dealer cash incentives, "because it gives us more flexibility to over-allow on trades, or with customers who are short of cash. It provides critical help facilitating their down payment."
Detroit slowdown
Meanwhile, Ford will cut production 3 percent in the second quarter and GM will trim output 4 percent as they retool for new models.
GM will shut truck plants in Flint, Mich.; Fort Wayne, Ind.; and Arlington, Texas, for a combined 28 weeks this year. Those plants are retooling to produce its full-sized pickups and SUVs for the 2013 model year.
Anticipating the shutdowns, GM boosted output earlier.
Likewise, Ford is retooling its Kansas City, Mo., plant this spring to produce the Ford Transit commercial van.
Chrysler Group is expected to increase output 7 percent in the second quarter. This spring, the company's Belvidere, Ill., plant will launch production of the Dodge Dart compact.
Confident that the Dart will sell well, Chrysler has hired 1,800 more workers and plans to ramp up production quickly. Chrysler also expects to boost production of the Jeep Compass and Patriot.
| Comeback | ||||
| Toyota and Honda production in North America is expected to surge in the 2nd quarter. | ||||
| Q2 2010 | Q2 2011 | Q2 2012* | Q2 2012 vs. Q2 2011 | |
| GM | 730,705 | 822,104 | 790,526 | -4% |
| Ford | 651,542 | 706,310 | 685,637 | -3% |
| Chrysler | 431,069 | 513,241 | 548,964 | 7% |
| Toyota | 366,118 | 202,896 | 410,266 | 102% |
| Honda | 322,260 | 176,287 | 380,240 | 116% |
| Renault-Nissan | 253,603 | 263,968 | 333,523 | 26% |
| Hyundai-Kia | 120,497 | 151,678 | 177,840 | 17% |
| Volkswagen | 99,770 | 120,629 | 156,161 | 30% |
| Other | 114,265 | 166,613 | 169,229 | 2% |
| TOTAL | 3,089,829 | 3,123,726 | 3,652,386 | 17% |
| *IHS forecast | ||||
| Source: IHS Automotive | ||||
You can reach Mark Rechtin at mrechtin@crain.com. -- Follow Mark on 
