The Big 3 would like everyone to believe the increase in Japanese market share so far this year is a direct result of the stronger dollar compared to the yen and that the strength of the dollar is the result of some sinister plot by the Japanese government and automakers.
Well, that's just not true. The people at this luncheon know it; the U.S. government knows it; and deep down inside, the Big 3 know it.
The reason the dollar is strong is pretty simple. The American economy is strong. And as the government has noted, a strong dollar is good for the consumer, translating into low interest rates and low inflation.
However, the Big 3 would have you believe we've used the weak yen to capture market share by cutting prices, increasing rebates and offering cut-rate leases. Again, that's just not true.
The argument completely ignores the fact that 80 percent of all Hondas sold in North America are built here. And it ignores the fact that the Civic and Accord have domestic-content ratings of more than 90 percent.
As a result, fluctuations in the dollar/yen relationship have minimal impact on our pricing.
In reality, we have not reduced prices. We have no rebate offers. We've spent less on incentives this year than last, and we spent less last year than the year before. And while we will continue to offer competitive lease programs, most of them are based on independent third-party residuals.
What the Big 3 are really trying to do is generate enough hot air to create a dollar/yen smoke screen to cover up for decisions they made several years ago.
To me, the shift in market share is really the same old story of missed opportunities and misread markets.
First, let me talk about the missed opportunity.
A couple of years back, when the yen was at 80 to the dollar, the import nameplates had to raise prices significantly.
The Big 3 had a choice. They could hold price increases to a minimum and try to gain market share, or raise prices, too, and increase profits.
They made the decision they have historically made, to go for profits instead of market share and raised prices right along with us.
As a result, there was no big shift in market share when they had a prime opportunity.
The other part of the market-share equation regards misread markets.
Virtually all of our growth this year will come as a direct result of CR-V sales. Take the CR-V out of our product lineup, and our sales this year will be virtually unchanged from last year.
Now, the CR-V is in a segment in which the Big 3 have elected not to compete. They've concentrated on the upper end of the sport-utility market, where profits per vehicle can be extremely high.
So the growth in Honda's market share is not coming at the expense of any specific Big 3 models, but from the growth of a market they were not interested in. Sounds a little familiar.
But it's hard to fault the Big 3 for their decisions. They made $13 billion last year and a near-record $4.3 billion in the first quarter of this year. From what I read, analysts are predicting even bigger, all-time-record second-quarter records.
The trouble is, now the Big 3 don't seem content with the piece of cake they wanted. They now want a bigger piece at our expense and at the expense of the American consumer.
Because what the Big 3 really want is higher prices for import-brand vehicles.
And every time that's happened - in the 1970s, the 1980s and the 1990s - the Big 3 have always gone for higher prices vs. increased market share.
Consequently, market-share changes are small, and Big 3 profits get bigger.
I don't think we want to start the cycle again. I know we don't; I hope the government doesn't; and the American consumer deserves better.
(Text of an address at the Automotive News Marketing Luncheon in Torrance, Calif., on May 6, 1997.)