No, not just because American buyers open their wallets for anyone hawking a high-riding vehicle; rather, because an influx of cash would help stabilize Honda’s balance sheet.
The automaker’s global profits took a 40 percent haircut in the fiscal quarter ending December 31, with net income falling 71 percent in the same time frame. North America wasn’t a fiscal fortress, either. While a new crossover that straddles segment boundaries isn’t the cure for all that ails Honda, it’s anything but hindrance.
The blows impacting Honda were thrown from many quarters. Warranty costs and sales expenses, combined with shrinking margins and falling car sales, hurt the company in the past quarter, Automotive News reports. A rising yen erased potential profit, too, while a water-damaged plant in Mexico reduced the North American supply of Fit subcompacts and engines bound for the Honda Insight (itself built in Indiana).
Operating profit fell 53 percent in North America last quarter, and the automaker now expects to take a 34 percent hit to its global net income by the end of the fiscal year.
While Executive Vice President Seiji Kuraishi claimed during an earnings call that his company doled out steep incentives to sell down the outgoing CR-V, one model alone probably doesn’t account for the projected 21 percent increase in per-vehicle incentive spending in January 2019. Data from ALG shows Honda with the steepest year-over-year increase in incentivization. Still, this hood cash ($2,132) is low for the industry, and represents a decrease of 2.4 percent from the previous month.
What Honda needs is a calmer global landscape with no major hiccups, and strong-selling models. The reborn Passport seen recently on these digital pages may not excite the senses, but looks built to sell. Basically a slightly shortened Pilot with greater off-road chops, the Passport is a two-row crossover designed to gobble up buyers in a hazy middle ground while offending no one with its styling. Can we call that sub-segment “lower midsize”?
Though Honda claims the Passport won’t hit dealers until Monday, some 126 Passports can already be found on the company’s January sales sheet. Overall, the automaker’s sales rose 1.5 percent, year over year, in January, with the Honda brand recording a 0.8 percent gain. Acura saw a 9.6 percent volume increase, helped along by strong RDX sales (which now eclipse the flat-selling MDX midsizer).
Interestingly, the MDX sold exactly as many units in January as it did a year prior: 2,968 vehicles. The RDX, however, saw its popularity grow by 40.9 percent.
[Image: Honda]
Wow. A 71% decrease in net income?? That goes from troublesome to disastrous. I would like to see a break out of the figures of Honda vs. Acura. I think Acura may be the real drag on earnings. I also don’t find that the discounts on outgoing CRV models were so huge. Here, in L.A., instead of $1K your could usually negotiate, it was running about $2K off list. Lastly, there is a proliferation of Honda models of gas/electric/who knows what fuels. Civics are moving, Accords moving (but not like twenty years ago) CRVs are booming but Insight and Clarity?????
Accord and Civic are both down, and have been for a while. The head-in-the-sand folks who pretend car sales are as robust as ever will blame styling, despite the fact that car sales from everywhere are falling.
Honda sales were up, so they’ve done a good job replacing car sales with CUVs. The more worrisome car maker is Ford, which lost money last quarter despite record sales of their pickups.
The 71% decline in net income is very misleading – Honda had a huge benefit from changing tax laws last year, making this year look worse than it really is. The 40% decrease in operating income is more indicative of their real financial position.
The lousy ZF gearbox would keep me from considering a Passport, but I think Joe/Jane Consumer will gobble them up in big numbers. And why not? It’s a Honda (doesn’t mean quite what it used to IMO), and unlike the new Blazer it seems to be priced right. How Chevy thinks they can charge a premium for the Blazer is beyond me. They’ll be piling cash on the hood in no time.
Yeah, the ZF gearbox is the one thing that’s really keeping me from really liking this Passport. It’s just not a good AWD system and after the last couple of weeks with 2 feet of snow it has reminded me how important a good system is
“It’s just not a good AWD system”
FWIW in various youtuber-tests the Pilot’s latest implementation of i-VTM4 is one of the more capable CUV systems out there at the moment.
I’m glad Honda has made an effort to fix it’s 4WD system
The Pilot system has always been distinct from the CRV as I understand it, different hardware entirely. I know you’re thinking of the CRV’s very weak system circa 2012-2018(?) when they optimized it for maximum fuel economy for the redesigned body (that and lowering ground clearance from the 2011). Not sure if they’ve dialed it back up at all since all those videos came out on the roller ramp testing showing just how little torque was being sent to the rear wheels.
@Rocket: “How Chevy thinks they can charge a premium for the Blazer is beyond me.”
Want some more of that? Head to the Buick dealer and see what they want for an Envision.
Rocket
Blazer too expensive?
Try one of the non-for-profit car companies: Hyundai, Jaguar, Ford
(the list will grow as more companies release earnings)
Same here — ZF transmission = no sale!
Not using a lousy ZF in Passport. It’s still the good old 6-sp, shared with Ridgeline.
No, it’s not the old 6-speed. The 9-speed is standard on every trim.
Is the Passport going to steal sales from the Pilot? Will we see more cash on the hood of Pilots in the near future? I see that January 2019 Pilot sales were down 26% from January 2018.
I doubt it, if you need 3 rows you have to get the Pilot. If 2 rows will do you the Passport is the better option
Probably a few, but it will cannibalize the CR-V more than the Pilot, which is a good thing for Honda. Not everybody looking for something nicer than a CR-V wants or needs three rows of seats after all. Then there are the non-Honda types who might be drawn to its slightly more rugged image, but aren’t “Jeep people” deep down. All very calculated I’m sure.
The CR-V is such a popular mommy-car that I doubt anything much will hurt it’s position in the school drop-off line
Lets not forget the 2017-19 CRV gas in oil problems plus the low to no heat issues
These problems are costing Honda a bundle for the fix that doesn’t work
I’ve soured on the brand completely. I have no interest in CVTS or push button shifters. Previously multi-Honda family. Now riding that 2013 Civic for a while.
I laughed when I saw the massive cup holders next to the shift pad buttons of various indentations. Spill a drink on there… what if the liquid freezes on the buttons. Does the transmission function? Needlessly unconventional. The Odyssey is the worst Honda offender with the gear selections located directly in the midst of the the climate, seat cooling/heating controls below the touchscreen next to the push button start. Have to look for the park and on/off buttons surrounded by every other control
I was just opining about how I (manual transmission, pushbutton and touchscreen) confuse the start and brake buttons on my modern car for the defroster and radio.
Its different, not impossible.
I, at near 40 years of age, recently learned to use a new stove. The buttons weren’t the same as the old one. Didn’t burn down the house. Dinner turned into poops like norms.
Pushbutton transmission controls are all weirdly styled, colored/lighted and have different types of actuation than radio buttons. You know this.
You know what happens when one cranks on the 4×4 knob instead of the radio? Nothing. The 4×4 knob has more resistance and the mind knows.
What happens when you have to go into reverse in an emergency and a train is coming? You get smooshed.
At least in GMC Terrain these buttons are positioned on the dash. Does not make sense for drivability but ergonomically – yes. Now so much space exists in the console. But if you in the situation where you need to make a quick turnaround… “Honey, where is the reverse button?”
“the outgoing CR-V”
Wut?! Just the outgoing model year CR-Vs or the CR-V as a segment competitor?
God, I hope it’s the former because how can you fight toxic masculinity without CR-Vs?
Lol, I can think of a lot of cars on the market who’s main job is to fight “toxic masculinity”
It takes 10 CR-V’s to neutralize one Raptor. The Raptor is so powerful, even my 71 year old dad went “whoa, would you look at that” the last time we cruised through the Ford/Lincoln lot. I have to admit, the Raptor looks great in Ruby Red.
I agree, but careful not to like the Raptor TOO much least we be accused of overcompensating for the neutering experience of the CR-V
I still don’t get the STANDARD 20s. You can get 17s on a 4Runner.
Realistically the off-road non sense Honda is trying to sell this with is the same ridiculous sales pitch that Jeep tries to sell Cherokees and Renegades with. Clearly they are incapable off-road, but marketing them as capable of going down a gravel road apparently sells. So realistically they can put 24s on it and it wouldn’t make a difference.
Renegade is quite capable off-road, actually.
The best in class without a doubt
Stay away from steep+loose traction scenarios and the Jeep CUV-based things are indeed quite impressive. But in the aforementioned scenarios, they absolutely throw in the towel from what I’ve seen.
Note how smooth the road is the picture.
“Note how smooth the road is the picture.”
Mustn’t scare prospective buyers.
I just sat in the Passport today. Well… Not impressed. Honda says, they skip LX and went straight for Sport. This is where I was today. Rear seat is a real mess in this car. Fabric is not convincing. Too much plastic for the price. It just doesn’t feel quality.
That’s my general impression of most newer Hondas I’ve been in, from 2016 Civics, to the ’11-’16 Odysseys my wife and I just couldn’t stomach the styling (inside or out) or materials of. The leather quality is notably better than the very cheap utilitarian stuff on our Chrysler van, but aside from that I vastly prefer our interior design and materials.
You’re right. When I test drove my ’11 Mazda3i Touring vs Civic EX, Mazda interior materials was way better. Honda was all-plastic and 4 or 5 shades of it. Now, my bro has ’11 Accord and this thing also has worse interior than my ’11 Mazda3. Its all plastic, rattles, not so cool
Yet another incrementally sized SUV/CUV. How many half-step vehicles does a person need? You just about need a highly calibrated micrometer to decipher the differences in size across vehicles these days. No longer just “small/medium/large” we now have “tiny/sort of small/small/a little bigger than small but not medium/medium/marginally bigger than medium/almost full-size/close to full size/full size/xtra full size…” it makes my head hurt!
EVERYTHING is like that today. It’s nice to have choices, but there is just so much choice out there it’s causing people to vapor lock. Combine that with the corrosive effects of social media and you get people who are flat out incapable of making decisions.
I disagree. The Passport was a necessary addition to Honda’s lineup. There was a MASSIVE gap between the CR-V and the Pilot, not just in size but in target audience. My theory: you need minor cannibalization to have a truly comprehensive utility vehicle lineup today. It’s why I think Ford is making a mistake killing the Flex — especially now that the Explorer is going RWD. Acura should increase the size of the MDX marginally and squeeze another model into the lineup above the RDX, too.
I agree with you, Rocket, back when 4-door sedans were king all the major players had at least a half-dozen offerings from sub-compact to full size land yacht. Now that the crossover/SUV is king the multiple offerings are similar. We all know when it comes to cars one size does not fit all
I agree with Rocket, this is a logical and well placed entrant, and it should sell very well for them. This competes in the two-row class of mid-ish sized semi-premium CUVs like the Ford Edge and Nissan Rogue, and I’ll throw the Grand Cherokee in there too based on size and price.
Lol. That’s a perfect description.
Lol. That’s a perfect description.
I’ll be interested to see what Blazer sales are once the Impala is discontinued. I think in GMs collective mind they’re just swapping one 5 passenger vehicle with good carrying capacity for another.
Just like I’m sure that Ford expects anyone who was going to buy a Taurus (at retail) will simply get an Edge or an Explorer.
The Traverse is the new modern day equal to the Impala. I was next to an new Buick Enclave at the gas station the other day and actually was quite impressed with it’s big Buickness and wondered why they just don’t call it an Electra 225
Ah but MSRP to MSRP the Blazer is very close to the Impala.
The article mentioned warranty costs.
If so, what are they? Bad ZF 9 speeds? Turbo motors?
No, Jerome10, not turbos or transmissions. The American Honda legal team demanded an increase for their efforts to block warranty claims from Honda customers. Legal expenses are rising, yo.
From what I’ve been reading, some potential culprits:
V6 VCM-related oil consumption from a few years ago
1.5T oil contamination issues
ZF9 shifting quality complaints
Smattering of electrical issues on 2018 Odyssey
I still don’t think that in terms of absolute numbers of cars/issues that this is on the scale of the things that the domestic manufacturers deal with, but maybe Honda just isn’t used to dealing with this volume of issues and dealers+corporate need to adjust to accommodate this sad new reality.
Current Honda Warranty issues, as seen by someone who pays close attention to warranty work at a mid-sized dealership:
The all-seeing, all-knowing Takata Airbag recall is still going strong, running about 25-30 inflators a week at the moment.
Current generation Odysseys are getting new sliding door mechanisms.
Current generation Ridgelines are getting fuel pump covers.
Brand new Passports are getting a new module for something in the Navi system.
Fairly new CRVs are breaking shifters at an alarming rate, all of a sudden.
1.5T motors in cool regions are getting updates to engine management to keep the fuel out of the oil.
There are a fair number of fuel injector sets being swapped.
LED accent lights are dying left and right, necessitating the swap out of the entire headlamp assembly (which ain’t cheap).
The Accord battery sensor recall is finally cooling off (we were doing 2 dozen a week a couple months ago).
The Odyssey VSA module recall has calmed down, after a strong 2018.
The Pilot suspension bushing recall seems mostly complete, another strong 2018.
The Ridgeline seat brackets were a small, but expensive, run.
The V6 ring issue (oil consumption) is mostly dried up.
In all, 2018 saw a ton of what I can only regard as manufacturing issues revealed by time and environment. 2019 seems to be starting off much the same.
Just as a function of statistics:
of the 104 claims paid this week;
24 were inflators,
35 were fuel pump covers (first week of those, and many of them were in stock units),
4 were door mechanisms,
4 were shift knobs,
2 were battery sensors,
and 15 didn’t have any parts at all (software updates, mostly).
So, in one regard, it’s a ton of recall work, but only a dozen or two actual “my warrantied item broke” repairs (aside from those CRV shifters). Most of the warranty work I see ends up being broken interior plastics or damaged seals, which….let’s face it…is probably more customer abuse than manufacturer defect.
one more bit of this:
I’ve not seen any 9-speed issues, yet. We’ve done some ATF drain and fills (which concern me, honestly), but I’m fairly sure we haven’t swapped any of them. Compared to my early days of doing an early 00s V6 AT every other week, this “problem” doesn’t really seem to be one, at this point.
Wow incredibly useful info psychoboy! I love the B&B insider scoop. I had forgotten all about the Takata thing, that would indeed be a big chunk of change for them.
I’m sure Honda gets their money back from Takata (or whoever is managing their current concerns), but Honda still has to pay the dealerships to do the work in the meantime. Not that Honda has a choice in the matter, but that’s probably a fair chunk of cash sitting in the accounts payable tray.
Honda dealers are taking orders at MSRP only. I will wait a year or two to see how the Passport shakes out! Not wild about the exterior looks either. It is suppose to be designed in California and took a lot of work to achieve this final design too. That is so hard to believe that to be true after look at it! LOL!