LOS ANGELES — Sedan staples such as the Chevy Impala and Ford Taurus are falling by the wayside as automakers adjust their portfolios to meet consumer cravings for utility vehicles.
Honda sees this as an opening.
With competitors moving away from cars, Honda believes it can fill the void in that segment and expand its business there, says Henio Arcangeli Jr., senior vice president of the automobile division of American Honda Motor Co.
The Accord, reigning North American Car of the Year, and Civic haven't been immune to slowing car sales. The Accord was down 14 percent through April while the Civic had slipped 2.1 percent after four months.
Honda, however, is holding firm with its household-name sedans and isn't throwing heavy cash into incentives to provide artificial boosts. Instead, the brand decided to trim Accord production to better align it with demand. Honda said in March that it planned to freeze production at its Marysville, Ohio, plant for 11 days over the next four months.
The company has a strong lineup of crossovers across its two brands, but if consumers want sedans, Honda will be there.
Arcangeli has been with Honda for about six months. Before that, he worked for Yanmar North America, a global manufacturer of industrial and consumer products, and Yamaha Motor Corp. USA, where he had responsibility for the motorcycle, ATV, snowmobile and outdoor power equipment business units.
Arcangeli spoke with Staff Reporter Vince Bond Jr. and Automotive News TV Editor Tom Worobec at American Honda's headquarters in Torrance, Calif., about the state of the car market, the Accord's slower sales, dealer relations and his transition to the car business.
Q: You came from outside the auto industry to Honda. Did anything surprise you about the business?
A: I did work as an intern for General Motors over a five-year period, so I'm not completely new to the auto industry. I had done my homework. I had come from the power-sports industry before that. Although the auto industry is much larger and more sophisticated, there are a lot of parallels in both industries. Namely, you have a durable consumer product that takes about three years to develop. You have a dealer network you work very closely with. There's a consumer you're marketing to trying to build your brand. The businesses are very similar.
Did you have experience building relationships with dealers during your time at Yamaha?
At Yamaha, the dealer network size was actually larger than what we have here. I've had a lot of experience developing dealer networks, starting dealer councils and things like that. The good news is Honda was far along with these types of efforts. It's been a smooth process. A lot of hours, but it's all been worth it.
How much interaction have you had with dealers in your short time here?
I've been with the company now a little over six months. I've been trying to visit dealerships as much as I can. I've been active with our dealer advisory boards, both on the Honda side of the business and the Acura side. I think I'm very much in touch with our dealer partners. I have regular communication, so I'm very much aware of what's going on out in the field.
Have they raised any concerns with you?
What's nice about our dealers is they're very competitive. They want to continue to grow their business. All the feedback that's been shared is very helpful. There are a lot of things we're working on to continue to improve our relationship.
I've been getting calls from dealers about the Accord's slower sales. Do you think dealers should calm down and let things play out?
The Accord's been very successful by many measures, starting with being the North American Car of the Year. That's a tremendous statement for how strong that product is. If you look at how the product is doing in the marketplace, we're continually gaining market share. The car is performing very well.
There are some parts of the country where maybe we have more inventory than we'd like, but we're working on those issues. As a manufacturer, we're always juggling supply with different models in different parts of the country. This is nothing new.
What are your plans if it struggles for the rest of the year?
I want to be clear that the Accord is not struggling. We're gaining market share in a competitive market. We just met with our field zone managers. Looking at the reports, Accord is No. 1 in many markets where it does compete in. Accord is doing very well. We want to continue to make Accord successful in different parts of the country where maybe there is a little more inventory. We're looking at a few actions that we can take there to alleviate some inventory. I also want to point out that Accord Hybrid launched not too long ago, and it's phenomenally successful right now.
The U.S. market is approaching a 70/30 mix of light trucks and cars. Do you feel Honda has the right product and capacity for that mix?
I do. We believe we have strong products in the segments we compete in. That's allowed us to be No. 1 or No. 2 in every segment we compete in. As some other manufacturers are stepping away from passenger cars, we see that as an opportunity for Honda and Acura because our passenger car lines are very strong. On the light-truck business, we do have production capacity there, so we're working hard to fulfill the demands of the marketplace. We're comfortable with our product lineup there. We're always looking to optimize our products, maybe add a product where it makes sense.
As far as your Clarity line, you've been really aggressive the past month or so in marketing the plug-in hybrid variant. Are you seeing an increase in store traffic?
By 2030, we'd like two-thirds of our vehicle sales worldwide to be electrified in some fashion. This has been a big effort for Honda in the U.S., starting with an education program. With that, as the Clarity has gone into the marketplace, every month we're getting more sales velocity. People are coming in and test driving the vehicle. It's not a compromise hybrid. It seats five comfortably, has very good performance, has a range rating of over 300 miles. It's a useful vehicle for many consumers.
Last month, I had a chance to see a focus group that Honda did on electrified vehicles. Some consumers thought they'd be stranded if a plug-in hybrid ran out of battery power, even though there's gasoline. There was some confusion. Do you think EVs are being pushed out before consumers are comfortable with them?
I think the challenge for manufacturers is to provide education to the consumers on the benefits of electrified vehicles. That's something Honda has been trying to do with our ad for Clarity, talking about how you can use battery and once the battery runs out, you have gas for longer range. That's something that the manufacturer has to continue to communicate in the marketplace. The reality is that as time goes on, more and more vehicles will be electrified in some fashion, so we really do need to start the education process to get sales to the level that we're targeting with electrified vehicles.
With the Insight, Honda hasn't had much luck competing with the Toyota Prius. What makes the newest variant different from the past ones?
This is the third generation. It's very stylish, has room for five comfortably, full trunk space. It's truly a no-compromise hybrid. We think it differentiates Honda from the rest of the competition.
Do you think it's still a direct competitor of the Prius?
It's a passenger car, so there will be some level of competition. If you look at the Insight hybrid versus the competitors in the space, I think it's by far the most stylish vehicle. I think consumers are going to gravitate to it.
Sales are a bit down this year, roughly 3 percent through four months. What do you attribute that to?
Our business has been relatively flat, fairly consistent with the marketplace. We are expecting at the end of the year to be up versus last year. If you look at everything we have in place, from new products that are coming out to our marketing plans, we're confident that we'll be able to grow our business by the end of the year.
Do you feel Honda and Acura incentive spending is in the right area?
From our perspective, the first thing you have to do is develop leadership product. Once you do that, you have to position it correctly in the marketplace. If you do that as well as produce to the level that the market wants, the products should sell very well on their own. Obviously, supported by great marketing, they should sell well on their own. The product shouldn't need very much financial support or incentives. Occasionally, if inventory gets a little too high in the dealer channel or we have some competitive issues, we may use incentives from time to time. Again, that's not the first thing we're ever going to do. That model has worked well for us, not only in the near term, for decades at Honda. We plan to continue to use that business model going forward.
You have a motorsports background from Yamaha. Do you want to get your hand in motorsports at Honda?
I'm more than happy in the auto business right now. It keeps plenty of my attention. I do talk to the people in the powersports business as well as our engine business, because we do work closely together. We're one team working toward common goals.