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Honda slashes Ridgeline production plan, blames soft sales on lack of incentives
JAMES B. TREECE | Automotive News
Posted Date: 10/31/05

TOKYO -- With Ridgeline sales starting out slower than expected, Honda Motor Co. is cutting production of the new pickup.

Honda is taking 3,000 units out of its January-March production plan. The full-year target was 50,000.

Honda CFO Satoshi Aoki revealed the plans to cut production during a press conference announcing Honda's earnings for the quarter ended Sept. 30.

The Ridgeline, Honda's first foray into the pickup segment, is built exclusively in Alliston, Ontario. The vehicle went on sale in March. Sales through September in the United States totaled 25,787.

Honda built 17,402 Ridgelines in the third quarter.

In an interview with Automotive News at the Tokyo Motor Show this month, Honda CEO Takeo Fukui blamed the soft sales on high U.S. incentives on light trucks.

He said Honda would not join the incentive wars to jump-start Ridgeline sales.

"We won't introduce any incentives," Fukui said. "We'll adjust our production."

Honda executives said they hope to lower overall incentive spending in the United States. But they conceded that Honda's spending has grown more rapidly than expected.

Hideki Okada, general manager of Honda's accounting division, said at the press conference that the carmaker hopes to trim U.S. incentive spending by about one-third in the October 2005-March 2006 fiscal second half compared with the previous six months.

But Honda also raised its forecast for incentive spending for the full fiscal year ending March 31. It now expects to spend between $990 million and $1 billion on incentives this fiscal year.

Last spring, Honda had projected incentive spending of $690 million. It then raised that forecast to $890 million in July.

Aoki said the company's worldwide operating profit in the quarter fell on higher incentive spending in the United States.

Honda's operating profits in the quarter declined 5.9 percent to 162.69 billion yen or about $1.44 billion at current exchange rates.

Leets

I just checked out a Ridgeline yesterday. My friend works at a Honda dealership so I got to give it the full rundown. I was actually quite impressed with it. I'm one of the few people who actually like the way it looks on the outside, and the inside definitely doesn't feel like you'd expect a truck to. It handles, not surprisingly, much like a car but has a V6 that feels more torquey than some V8s I've driven. I was really impressed... then I saw the sticker price. It was about 3k more than the Tundra Limited TRD that I had seen earlier that day at a Toyota dealership. If I didn't know better I'd say that right there is killing a good number of sales.

mmarshall

Well, right there's part of the problem.....stubbornness. Sometimes you need to get your head out of the sand and do things without making excuses why you can't. If they don't do incentives, they'll probably have to lower the price.

flipside909

This truck is still a flop. Honda denies the fact that it really is.

"Honda CEO Takeo Fukui blamed the soft sales on high U.S. incentives on light trucks"

Really? Why is it that the Tacoma and Tundra sales were literally unharmed during this same period of time.

Iceman

I'm no expert on the truck market, but I think you all are being a little harsh on Honda here. First off, they've cut production by a measly 6% off their target. For all the non-believers who said Honda couldn't sell a pickup, that's proof that you were wrong.

As for comparing Ridgeline sales to the Tacoma and Tundra, did Toyota match the U.S. manufacturer's incentives to keep their sales steady? I don't know--that's an honest question--but it could be a reason why Toyota didn't lose sales.

And I'm especially surprised to see mmarshall dog them for holding the line on prices. I thought it was well acknowledged around here that the out-of-control incentives are a big factor eating into Big 3 profits. Once buyers get accustomed to massive mark-downs, they will never respect a model or pay close to sticker price for that entire line ever again. Honda has chosen the only sensible approach, which is to maintain their profit margins and brand strength by acknowledging that there is less demand than they initially estimated but maintaining the position that the vehicle is properly priced and selling it to those who agree.

ArmyofOne

I wouldnt blame it on soft sales, i would blame it on Sky high prices and barfbag looks.


that thing is hideous.

LexFather

Basically, but the Honda guys are a loyal bunch. I haven't seen too many here in Atlanta but when I do I try to look the other way before I throw up.

GRAND_LS 4

iTrader: (2)

Because as you know, incentives kill resale value. You also know that Honda fights hard to keep its resale values high, like not sell to fleet or rental companies. Thats my guess.

440+6

I think it may be the fact that it is really a front wheel drive bias, the bed isn't big enough, it's not body on frame. Alot of truck buying people need something basic that functions well, something Honda does well, but it has to be more archaeic.

bitkahuna

iTrader: (20)

I think it would sell better if they renamed it the Honda "Birdflu".

LexFather

Holy **** I spit out my drink when I read that.....I can't stop laughing.

POLL TIME!!!!

mmarshall

It's not so much me ******* them, Iceman. It's just simple supply and demand. In the auto buisness, you cannot dictate prices at the factory level based on a company "tradition" of either incentives or no incentives. What vehicles actually sell for will be determined by the market and the demand for them....especially at the dealership level where high-demand /ow supply cars ( like the Ford GT ) can sometimes be marked up 100%....or practically given away. Yes, there are companies like Saturn with rigid no-dicker prices, but even those prices are " negotiable " by bargaining on trade-in values or on finance rates. And Saturn, at the factory level, adjusts prices periodically to adjust for market conditions.
Honda's clear mistake here is that management wants to dismiss market conditions to uphold the company's tradition of no incentives.....without lowering prices. They want to FORCE price stability by cutting production....which does nothing for the overstock they already HAVE that will just sit on the dealer lots collecting dust and bird droppings if they are not sold.
This truck clearly is not selling well at the factory sticker price...and dealerships can only afford to discount so much on each one.

Now..you bring up the issue of incentives "eating into the big 3 profits". Again.....why do domestic companies have to sell with incentives? Because the public, at large, has decided that many domestic-nameplate cars are not worth full sticker...or a small discount. The run-up in gas prices ( no starting to reverse a little, by the way ) made large SUV's and some cars with big V8 difficult to sell...incentives were a must.

And keep in mind that incentives, contrary to public perception, are not just rebates....they can take MANY forms.....but in the end accomplish the same result.....more car for less money.
Honda is going to have to learn this lesson with the Ridgeline....cutting production alone is not going to solve the problem.

Koma

iTrader: (3)

THANK GOD! Now for the next big idea from Honda.... kill the Ridgeline completely.
I've only seen a few in the Greater Boston Area. Sales are not going good. I saw one that was completely riced out. I guarantee that one was owned by a fanboy who would buy a Honda even if it was built off a tinfoil chassis.

mmarshall

I personally would not like to see this truck go.

I'm well aware that there are a number of you here at CL.....particularly flipside....who dislike this vehicle, but it does have a number of automotive (or should I say truck? ) firsts and some unique features like the under-bed lockable exterior trunk and the combination unibody AND ladder-frame design...the best of both worlds. What it is lacking is a high-torque V8 for heavy towing and, as noted in my last post, flexible pricing for a changing market.

e-diddy

Re-dessign the front end and sales should increase.................. maybe