Honda Moves Past Civic Dings

It can’t be much fun to be a Honda executive these days. The company and its products had become rather stodgy and predictable even before the earthquake and tsunami in March turned Honda’s supply chain upside down and resulted in a worldwide, disastrous drop in sales.

The results of Honda’s long, dark night are still showing up. For one thing, Honda just reported that its fiscal first-quarter operating profit plummeted, by 90%, and quarterly sales dropped by 27% as the company coped with the aftermath of the disaster.

To be fair, Toyota's net profit dropped 99% in its latest report (while also raising its forecast), while many analysts predicted that Honda wouldn’t report any profit at all for the period — and there is increasing hope for Honda on the production side.

Honda has begun returning output to normal both in Japan and in its North American operations, meaning that within the next several weeks, Honda’s supply and inventories once again will reach levels in the U.S. market where shoppers can count on getting the Honda or Acura vehicle they want.

In light of that, Honda actually has raised its annual sales projection to a level – about $112 billion – that would come out nearly flat with a year ago, and better than it expected in June. Still, huge headwinds confront Honda.

The strong yen erodes earnings from the U.S. and elsewhere overseas. Perhaps even more important, however, is that Honda just received bad marks from Consumer Reports over its Civic, a ding on the model that Honda refutes.

The compact sedan — which Honda has been promoting with a character-driven "To Each Their Own" campaign — long has been one of the staples of Honda’s fuel-efficient lineup, the vehicles that helped Honda grab a huge share of the American market over the last quarter century.

Still, outside analysts have been panning Civic for some time as boring and unimaginative, and even the new, redesigned 2012 version is compared disfavorably with competitors such as the Hyundai Elantra and Nissan Sentra.

The influential magazine ranked Civic second from the bottom in a new 12-car “shootout,” even though CR ranked Civic highly for years. It was “the first time in recent memory” that Civic hadn’t gotten a thumbs up from the magazine.

The small-car market in the United States is only going to get more competitive in the months ahead as other Japanese makers return in volume, and none of the other players who have picked up market shares over the last six months — American, German and Korean — will give them up easily.

Honda needs more than a warmed-over Civic to get out of this mess.

• Related reading: Why green leadership matters for Japanese brands