Henio Arcangeli Jr. is approaching two years as senior vice president of the automobile division at American Honda Motor Co. What keeps him up at night is maintaining the momentum and competitive spirit of the Honda brand in a softening market and rebuilding the newly energized Acura luxury marque.
At Honda, one of the current mantras is "cars matter." Not only from the perspective of driving enjoyment, but also because younger demographic groups such as Generation Z are gravitating toward the affordability and style of passenger cars.
Over at Acura, the story is a bit different, with the redesigned RDX crossover sparking a resurgence in the brand and a blueprint for moving forward in styling, features and performance.
American Honda is somewhat unique in the U.S. market as a major player that shuns fleet sales and maintains incentive discipline at a time when rivals are pulling those levers. Honda and Acura are also on the racing circuits, so offering lively products remains key to the company's DNA.
Arcangeli, who previously worked at Yanmar North America and Yamaha Motor Corp. USA, spoke with Staff Reporter Laurence Iliff and Automotive News TV Anchor Jennifer Vuong last month in Detroit. Here are edited excerpts.
Q: In your time at American Honda, what are some accomplishments and what are some areas that still need work?
A: I'm very proud of just how well the Honda team works together. And I think you really see the results of that this year: The retail industry is down about 5 percent and Honda is up over 1 percent over the last year. We're growing the business, we're growing market share, and our Acura business is up over 6 percent over the last year. Also, dealer profitability for the Honda brand and the Acura brand is up over the last year, so that's something that we're proud of. I'm also very proud of the resurgence of the Acura brand with a new introduction of the RDX, which has been an absolute home run. The Acura brand right now is very vibrant. Our dealer partners are very excited. So both the Honda brand and Acura brand are doing very well. In terms of what I'd like to see at Honda, the bar is up here in terms of our targets and we're never really satisfied, and that's one reason why we race. We have that challenging spirit.
How do you see the sales climate in North America, both in general and for your brands?
We agree with most assessments that the overall industry will be down somewhere between 16.5 million and 17 million units. With that, we could see a continued shift to light truck. We think light truck will be, on an industry basis, about 70 percent of the mix. For Honda, we see the mix closer to 55 percent truck, 45 percent passenger cars, because our passenger-car vehicles are so strong in the marketplace. Our light-truck lineup is very strong. We'll sell more trucks this year than last year, and CR-V will be our best-selling vehicle again.
With all the talk of auto industry mergers in the news, it's interesting to see how an independent brand such as Honda will work with others. What's the strategy for collaboration without losing that Honda DNA?
Honda has been an independent company for a long time. We've been doing business here in the United States with American Honda for 60 years — 2019 is a major milestone for us. With that said, with the industry changing and the huge investments that have to go into environmental vehicles as well as connected vehicles and autonomous vehicles, Honda is working with strategic partners where it makes sense. We have a strategic partnership with GM and Cruise with our shared-vehicle program. Also, we're working with General Motors on battery technology as well as fuel cell. So, we work with strategic partners where it makes sense.
Are the U.S. tariff threats — against Mexico and everyone else — just creating more uncertainty, or are they actually hitting your bottom line?
We see it as not being a Honda/Acura issue. This is really an industry issue because all these tariffs really impact the supply chain for all the auto manufacturers. At Honda, we've been very vocal about this. We've also been speaking with several elected officials and basically stating that we really believe that allowing the competitors to compete on the merits of their products is the best way. Open competition is the best way to run our businesses. It's the best thing for our partners, and for consumers as well.
Why does American Honda say that cars matter when the market is moving to SUVs and other light trucks?
I think you need to start by looking at the numbers. If you think that the industry is going to be a little less than 17 million units this year and about 30 percent being passenger cars, then that's about a 5 million unit market, which is huge. And if you look at several manufacturers that are stepping away from passenger cars, that creates an opportunity for growing our market share — potentially growing our overall volume as well.
I think the real linchpin here is that focusing in on cars is key to the future. Our research shows that 55 percent of all first-time buyers are not buying SUVs. They're not buying pickup trucks, and they are certainly not buying minivans. They're buying passenger cars. So, what a better way to bring a new consumer to the auto industry, introduce them to your brand, have them buy a stylish, fun-to-drive, dependable, reliable vehicle — purchased or leased through the best dealers in the market. And then after three, four, five years down the road, when it's time for a new vehicle, they're very much likely to come back to the brand.
Where's the Acura brand going in terms of finding an identity in the luxury space?
For Acura, our key theme is precision-crafted performance. That's something that guides us in terms of what we want the Acura brand to be. And you can really see that with the introduction of the NSX, which is the pinnacle of our DNA in terms of where we want precision-crafted performance to go. And most recently with the introduction of the RDX. The RDX exemplifies everything that we want with premium styling, excellent performance, a high level of technology and a fun vehicle to drive. I think all the products that you see going forward are going to have that same DNA.
Honda continues to be the subject of vehicle recalls, but also retains a high level of trust by consumers. What are you doing to address quality problems?
There is a high level of trust by consumers for the Honda and the Acura brands. And, unfortunately like all manufacturers, we've had our quality issues and recalls. But that's something we've been very transparent about. When we see an issue, we step up very quickly because we want to address it from a safety standpoint. And going forward, obviously we're focused on improving quality.
How are dealer relations?
The most recent NADA dealer survey ranks Honda right up there in terms of overall index in the industry. Our Acura franchise over the last few years has made a quantum leap and is now one of the top 10 brands in the overall index. I'll also tell you that we score very high when it comes to our field salespeople with both Honda and Acura dealers. So, I think our dealers are very happy right now. Both Honda and Acura sales are up this year versus overall retail being down 5 percent. Dealership profitability for both Honda and Acura dealers are up. Our dealers are very competitive, they want to grow. We want them to grow.
Honda is making an aggressive push into eco-cars with the Insight and Clarity. When do you think hybrids, plug-ins, EVs and fuel cells will be a significant part of the market?
In the United States, electrified vehicles are still less than 5 percent of the total market — it's still relatively small. But year after year, it's only going to be growing. I'm happy to say for our Honda business, our electrified business from 2017 to 2018 almost doubled. It's going to grow again in 2019. Honda has four different platforms for electrified vehicles, everything from full hybrid, plug-in hybrid, battery electric and also hydrogen. In the midterm, what we see as the best technology for the consumer from a price standpoint, a performance standpoint are hybrid technologies.
Why is it important that Honda continues to race at a time of pinched budgets?
Racing culture is part of our DNA. And Mr. Honda actually built a racetrack in Japan before he actually produced his first production automobile because he believed that racing is important for the organization. It's very important for the culture to have that challenging spirit. It's that challenging spirit that I believe has allowed Honda to grow an amazing business not only in Asia but globally as well as here in the United States. And it's basically our culture that helps drive the company forward.
What keeps you up at night in general in the industry?
Obviously, we have a fantastic team, so I try to provide the right level of leadership for Honda and Acura to continue to be successful in the marketplace and also to fulfill our customers' needs. And 2019 got off to a great start. So, trying to continue that momentum throughout the year is probably the thing that keeps me up at night the longest.