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Honda faces uncertainty after rebounding from tsunami

November 9th, 2012 6:33 am by By Everdeen Mason, Dayton Daily News (MCT)

Honda has rebounded from the Great Recession and natural disasters, investing more heavily in North American operations than ever, but the company’s latest earnings report indicates the automaker has more to overcome.


Honda celebrated its 30th year of American manufacturing last week. And in August, the company launched the 2013 Accord to positive reviews from auto critics.


But Honda still faces slow sales growth because of tense foreign relations with China and increasing pressure from competition.


The company has mostly recovered from a 50 percent drop in production after March 2011 because of natural disasters in Japan and Thailand, which put the launch of the much-anticipated Accord model in jeopardy.


“Through the crisis last year, the positive of that was we had time to reflect with the team and help find a way to reach that (Aug. 20) launch,” said Jeff Tomko, manager of Honda’s Marysville, Ohio, plant. “We used the time to improve our plant and our process. The quality of mass production of this vehicle is better than any new vehicle startup we’ve had.”


Larry Ryan, a Marysville native who’s worked at the plant for 28 years, calls the Accord the “bread and butter” car of the manufacturer. He said the new launch helps to bring closure to a difficult year and to begin a new, positive stage for the company.


Auto analysts agree.


“They are definitely on the upswing here,” said Tracy Handler, an analyst for IHS Automotive, a global economic forecasting firm. “You have so many different things that have caused sales in the U.S. to be low — the tsunami and bad economy — but they are still on the upswing.”


Honda released new projections for year-end profits, lowering initial projections of $5.9 billion in income through March 2013 to $4.7 billion. That still is an improvement over last year’s $2.6 billion.


This year is projected to be Honda’s best since 2010, when the company posted a net income of $6.4 billion.


As Honda recovers, it still has global economic problems and competition with other manufacturers to contend with. The main reason projections for the year are down is because of territorial disputes Japan has with China, which has stopped buying Honda products as a result.


Handler said the issue has affected all Japanese manufacturers, including Nissan and Toyota.


“It really puts a damper on sales there,” she said. “We expect this to be a problem for the next few months until they can come to some kind of resolution between the two countries.”


Honda of America’s vice president of manufacturing, Jim Wehrman, seemed unconcerned about the issue during a recent visit to Springfield, Ohio.


“The best contingency plan is to be global,” Wehrman said. “We export to South Korea, Saudi Arabia and South America. It won’t have that big an impact.”


The issue of competition has more lasting implications. While the 2013 Accord is expected to generate great sales and positive buzz, analysts don’t think it will carry the same weight as new launches once did.


Auto analyst Dave Cole said Honda was ahead because it has more domestic manufacturing than any other Japanese manufacturer and also has a history with the Accord.


But “with the Accord, it’s almost impossible to come up with a game-changer these days,” he said. “Execution by all manufacturers is really good. It’s a dog-eat-dog world, and you never know what’s going to give someone a competitive advantage.”


Honda employees are aware and have worked to perfect their processes.


“The competition has closed the gap on us, and we feel the pressure,” said Rob Mayn, Honda product department planning leader in Marysville. He has been with Honda for 27 years. “We’ve got to suppress that pressure and stick to the game plan. … There’s a little bit of angst; I would be lying if we said we weren’t feeling that.”


The natural disasters of 2011 also forced all manufacturers to become leaner, more efficient and more cognizant of its product parts.


“There was a point where manufacturers didn’t know where all suppliers are coming from,” said analyst Handler. “This gave manufacturers a chance to look and go ‘this is where we get this part from’ and make sure they aren’t sourcing everything from the same place. In that sense it has helped the industry as a whole.”


As Tomko said, in Honda’s case, the disasters caused them to improve operations to launch the Accord on time — a move that will allow for better production and growth in the future.


The Accord so far has great reviews, and that bodes well for future models such as the Acura NSX — which will be built at a new plant to be constructed in central Ohio.


“The refresh on the Accord this year really looks to be really solid product for them,” Handler said. “We’re starting to see them on the road, and they look really sharp.”


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©2012 Dayton Daily News (Dayton, Ohio)


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