Honda Division and its dealers have a tough year ahead.
While sales have been growing, both Honda dealers and its executives know the company's dominance in the car segment is in peril.
For the most part, Honda dealers were upbeat during the make meeting, but some issues make them nervous:
"They (the dealers) are feeling pressured in the small and mid-sized car segments, and the large incentives by the domestics are not helping," said Dick Colliver, executive vice president of American Honda Motor Co.
He also said the Honda dealer gross profit has slipped, but he would not say by how much.
"There's a lot of pressure in the marketplace right now," Colliver said, "and a lot of marketing dollars are being spent to sell cars."
Honda dealers did not seem too worried when they left the meeting.
"They said the first six to seven months would be harder in the car business, and they're going to do something about it," said Ramsay Gillman of Gillman Honda in Houston. "I believe them."
Honda already is offering dealers from $400 to $800 in dealer incentives for each Civic they sell, and it has increased its ad budget about 50 percent in the first quarter.
The budget also might be increased the second quarter, but Honda will not offer customer cash incentives to move its cars, Colliver said.
"Cash incentives have destroyed the used-car values," he said. "Resale is a tremendous asset for us. We just have to get through this year until we can get to new '05 models like the Odyssey."
Colliver also said the company is working with dealers to establish satellite service centers to meet customer needs. He said dealers have opened 15 centers around the United States. But he said more are needed, especially in high-density areas such as New York City. Colliver expects more centers will open this year.
Michael Zimbrick, chairman of the Honda Dealer Advisory Board, says increased service capacity is needed not only to improve customer satisfaction but to boost dealer profitability.
"Service is our business to take," he said. "If we increase the service capacity, we will get more parts and service business."
A high priority is to get the company and the dealers to work more closely together on issues, Zimbrick said. "Before we reacted to situations," he said. "Now we want to do things proactively."
Colliver believes that Honda Division sales will increase this year but that car sales probably will be down slightly.
Honda sold 1,178,929 vehicles in the United States last year; 706,492 were cars.
