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 — which employs about 825 workers from Champaign County and 650 from Clark County — celebrated its 30th year of American manufacturing Thursday and announced $200 million in investments and 200 jobs for the Anna Engine Plant and Russells Point Transmissions Plant. 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, Marysville plant manager. “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.
National 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 instead 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 gain 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’s vice president of manufacturing, Jim Wehrman, seemed unconcerned about the issue during a visit to Springfield Rotary Club on Monday.
“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.”
Employees said the company talks often about competition in the industry and how it affects how cars are made.
“Nobody talks about this, but we’ve made the Big Three better,” said Jeff LaRoche, a Honda employee of 30 years who works in assembly in Marysville. “We’ve made them think about how they made their cars. And then we had to make our cars better too.”
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.”
Like 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.”
With the launch of the new Accord and upcoming models, the plant has been able to grow substantially, benefiting the region.
“Any employer in our community or out in surrounding areas is critical to survival of the region,” said Sue Bailey Evans, director of both the Champaign County and Logan County departments of Job and Family Services. “As Honda has been looking at expansions, it affects the entire region … not just the county the plants are located in.”
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